HR Issues in Australian Banking System

This report discusses the current HR issues and challenges in the Australian banking sector, including unethical practices, fraud, and misconduct. It explores the recommendations of the Banking Royal Commission and provides suggestions for a new manager to overcome these challenges. The report also covers topics such as change management, leadership issues, employee engagement, motivation, and reward systems.

Running Head: HR Issues in Australian Banking System
Australian Banks and HRM Issues for a New Manager
Report
System04104
5/9/2019

HR Issues in Australian Banking System
1
Table of Contents
Introduction................................................................................................................................2
History and Overview of Banking System in Australia.............................................................2
The features of Australian Banking System...............................................................................3
Current Issues and Challenges in Australian Banking Sector....................................................4
Respond of Federal Governments and Federal opposition on the Recommendation of
Banking Royal Commission...................................................................................................5
Respond from the banking Industry to Royal Commission...................................................5
Current Issues in Australian Banking sectors............................................................................5
HRM Issues in Banking Sector and Challenges for a new Manager.........................................6
Change Management Issues...................................................................................................6
Leadership issues....................................................................................................................6
Engagement of Employees.....................................................................................................7
Motivation and Encouragement of Employees......................................................................7
Appraisal and Reward System................................................................................................7
Issues related to performance management............................................................................7
Role of Royal Commission Recommendations to improve the HR issues in Banking
Organisations..........................................................................................................................7
Recommendations......................................................................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................10

HR Issues in Australian Banking System
2
Introduction
The Australian Banking system is one of the most reliable and transparent industries.
The Australian banking system consist local banks, foreign banks, overseas banks, and some
locally incorporates subsidiaries bank of overseas banks. However, the current Australian
banking system is suffering from various challenges and issues related to unethical practices,
fraud, misconduct in organisation, corruption etc. (SBS News, 2019). These current issues
and challenges in Australian banking sector makes difficult for a new manager who wants to
join the banking industry in Australia from other countries. Apart from this, various human
resource issues such as poor working environment, cultural diversity, inequality in
remuneration, low job participation, and unethical behaviour of staffs are some of the issues
which causes problems for a new foreign manager in Australian. This report also includes
suggestions of Banking Royal Commission (also called Hayne report) and its investigation on
the some of the major banking organisations of Australia. This report helps to understand
different challenges and HR issues that a new manager will have to face in Australian
banking sectors. Further, this report provides some important recommendations based on the
analysis of these problems that how a new manager can overcome these issues and challenges
in Australian banking organisations.
History and Overview of Banking System in Australia
The Australian banking history is almost 200 years old. The first bank of Australia
was opened in 1817 in Sydney, named New South Wales Bank. After this, a new bank was
introduced by the British government in London, called Bank of Australasia. The name of
this bank was further changed and it was renamed as ANZ bank. However, currently there are
many small and large banking organisations operating their business in Australian banking
industry (Reserve Bank of Australia, 2018). Even some of the small banks merged with the
big four banks of Australia. These big four banks of Australia are as follow:
Name of Bank Customer size Bloomberg Rating
1. Commonwealth Bank 17 million 1
2. Westpac Banking Corporation 13 million 4
3. National Australia Bank 9 million 5
4. Australia and New Zealand Bank Group (ANZ) 8 million 7

HR Issues in Australian Banking System
3
(Source: Reserve Bank of Australia, 2018)
These four banks almost cover entire banking system of Australia and also affect the
business of other small banks such as Adelaide Bank, Bank of Melbourne, and Bank of
Queensland etc. There is a tough competition among Australian banks to acquire market
share and increasing in collection of investment funds of people. However, the concept of
retail banking in Australia is still unclear. However, there are many foreign banks are
entering in the Australian Banking system and the government also liberalise the banking
rules for it.
(Source: APRA, 2018)
The Australian government is also focusing on privatisation of banks and giving
permission to other overseas and international bank to open their branch in Australia
(Reserve Bank of Australia, 2018). However, the Reserve Bank of Australia (RBA) regulates
the banking operation and APRA (The Australian Prudential Regulation Authority)
monitoring and regulating the investment funds of people in different banks. It is also
responsible for monitoring issues related to finance and insurance companies, private health
insurance, funds of Australian depositors and investors etc. APRA is responsible for
managing funds of 3.7 trillion of various financial organisation and people of Australia who
deposited their money in banks (APRA, 2019).
The features of Australian Banking System
The major features of Australian banking sectors are as follow:

HR Issues in Australian Banking System
4
1. Australian banks are known for their contribution in Australian financial system.
Australian banks hold more than 55% of the total assets of Australian financial
institutions.
2. The number of banks in Australia is increasing every day as there are many small and
medium size financial organisation are converting themselves in mutual banks.
3. ADIs (Australian Depository Institutions) hold almost 4.6 trillion capitals, which is
two times higher than Australian nominal economy.
4. There are various services and products provided by the banks such as health
insurance, car insurance, personal insurance, loans (personal loans, car loans,
education loans, business loans, agriculture loans) and other financial help and
suggestions.
Current Issues and Challenges in Australian Banking Sector
The Australian banking system is facing strong issues in banking sectors. In 2018, the
banking commission and regulatory authorities found many unethical practices of banks
including some of the major banks of Australia. The banks were involved in many unethical
practices such taking and giving bribes, charging money from customers for no service,
selling insurance to customers without considering law related to insurance, frauds, etc.
However, it is really a worst scenario for a new manager who wants to join Australian banks
as a manager (Paulet, Parnaudeau, & Relano, 2015).

HR Issues in Australian Banking System
5
The Australian government taken these issues and unethical practices of the banks on
serious note and established a committee over these issues named “Banking Royal
Commission.” The commission investigates these issues and found that there were many
irregularities in the banks. Some of the major banks of Australia like ANZ were involved in
serious frauds and unethical practices (Hayne Report, 2018). These banks were involved in
misrepresenting information related to funds and mislead the regulatory bodies by provide
them inappropriate information. Banks were misusing the customer’s investment funds and
deposits and utilise the money somewhere else for personal interests. The Hayne report also
included in its final report that some of the top executives and leaders were also involved in
the scam and unethical practices of banks. Bank’s staffs were doing unethical practices and it
was done under the knowledge of top executives and senior leaders of the banks (Oates &
Dias, 2016). It means the involvement of senior leaders in the unethical practices of banks
was a serious issue. In such scenario, it is a difficult and a major challenge for a new manager
to give his/her duties in the Australian banks. A new manager if not aware about these
problems, then it creates problem in performing his job roles in the organisation. Unethical
behaviour of banks is also a serious problem for a new manager, who will join Australian
bank as a manager (Hayne Report, 2018).
Respond of Federal Governments and Federal opposition on the
Recommendation of Banking Royal Commission
The Banking Royal Commission has provided 76 recommendations to improve the
situation of banks and promoting ethical and fair banking practices. The Royal Commission
recommends in its final report on banking frauds and unethical behaviours that Banks need
top to bottom reforms in both ethically and culturally. The Federal government of Australia
and opposition federal both accept the recommendations of Royal commission and are started
to reform the banking culture (Bernard, 2018). The Federal government of Australia is
making strict law against banking misconduct and it is well supported by the opposition party
(Hayne Report, 2018). The government will consider the banking frauds as a criminal offense
and people who will found to be guilty will be punished by the Australian law. Apart from
this, the government will also corporate a law enforcement agency that will monitor and
enforce law in the banking organisations. Apart from this to avoid ‘fees for no service’, the
government will bring a scheme that is “free for all” (Hayne Report, 2018).

HR Issues in Australian Banking System
6
Respond from the banking Industry to Royal Commission
Promoting culture and ethical practices in the organisation is a major essentiality in
banking industry. The banks have been responded positively to the Hayne report
recommendations. Banks will promote ethical practices in the organisation. They will
promote organisation and ethical culture in the organisation Banks will also provide training
to the staffs for promoting fair and ethical work culture (Verrender, 2019). Apart from this,
involvement of any person in fraud and unethical practices will be considered as serious
crime and person will be terminated from the post after found guilty without any
discrimination of designation or power. The top executives and senior manager of bank will
ensure that there will be no extra charges for services from the customers. Fund will be
utilises under the law and financial regulations and every bank will follow the law banking
laws of the country (Landmann & Hess, 2018).
Current Issues in Australian Banking sectors
The Australian banking system currently facing strong problems related to leadership
and organisational culture. The officers of royal commission investigates several issues of
banks and found guilty both organisational leaders and staffs. However, apart from the frauds
and corruptions, several issues also highlighted in the royal commission report that banks are
charging fees for ‘no service’ (William, 2018). For example, banks are selling their products
such as health insurance and loans to customer without APRA following laws and
regulations. Utilisation of funds is still a major issue in Australian banking system. The final
report of royal commission included that unethical organisational culture is a major issues for
banks and it was not followed by both banking organisations and its leaders (Jennett, 2019).
However, the final report of Royal commission recommended about promoting organisation
culture and motivating people for doing ethical practise in the organisation. An honest
manager who is coming from other countries to join Australian banks must consider these
things to deal the situation in bank. However, the high NPA of banks is also a current
problem in the organisation. Motivating people and enhance the organisational culture in the
organisation really a big challenge for a new manager (Robertson, 2018).
Another problem in banking sector is inappropriate working conditions and inequity
in remuneration standard. It has been found that staffs and manager paid very low salary,
while a large part of the income is taking by the CEO of the organisation as a salary. For

HR Issues in Australian Banking System
7
example, the CEO of AMP financial organisation was getting a huge salary package but in
organisation, salaries of employees were not following the proper APRA practice guidelines.
HRM Issues in Banking Sector and Challenges for a new Manager
There are many human resources issues in Australian banking sector. However,
problems related to leadership, managing change, employees engagement and retention,
employee development, wages gap, working conditions, appraisal and reward system,
behaviour of banking staffs etc. are some of the critical issues that a new manager have to
face in Australian banking sector (Ryan, 2019). Some of the issues are discussed below
which a new manager will have to confront in Australia.
Change Management Issues
The Banking organisations in Australia are currently facing many HR and ethical
issues in Australia. Therefore, many banks in Australia need tremendous change in the
organisation and change in management. However, the problems for a new manager in
Australia are that he/she has to motivate people and encourage them to adopt changes.
However, it is human nature that people are not adopting change at first sight or always resist
change. Thus, promoting change in the organisation will be the first priority of a manger in
Australian banking organisations (Otoo, 2019).
Leadership issues
This is another major problem for banking organisation in Australia that most of the
leaders in banks were involved in unethical practices or in corruption. Thus, establish a good
relationship with a corrupt leader will always be difficult for an honest manager. Manager
should not promote any unethical practices in the organisation. However, if any leader or
senior officer involved in corruption, new manager should complaint the issues with the
regulatory bodies or respective senior authority. For example, Promoting corruption or fraud
with senior leader is also a crime. Therefore, in such conditions, it will be difficult for a new
manager to establish a good relationship with senior managers or top leaders of the
organisation.
Engagement of Employees
Promoting engagement of employees in banking organisations is also a tough
challenge for a new manager. It has been seen investigated by the Banking royal commission

HR Issues in Australian Banking System
8
that Banking staffs were also involved in unethical practices and frauds and these all practices
done under the knowledge of top managers. For example, people who are involved in
corruption and bribery will not engage in organisational work because they earn money from
other sides. Therefore, encouraging these types of people in the organisation is also a major
challenge for the new manager in Australian organisation. People who do not want to work in
the organisation must be first warned and then terminated from the organisation.
Motivation and Encouragement of Employees
Motivating employees is a role of senior manager or leader of the organisation. It will
be tough if a manager take the position in foreign condition such as in Australia. For
example, the incident of unethical practices and frauds in Australian banks destroy the images
of banking organisation in the mind of people. However, it also demotivates and depresses
those staffs and employees who were honestly doing their job in the banks. Encouraging such
people and motivate them towards creating a positive environment in banks will be a tough
job for a new manager in present Australian banking environment (Brown, 2018).
Appraisal and Reward System
There is an inadequacy in the Australian remuneration policy. A manager should
assess whether the individual remuneration outcomes is related with the performance and job
roles of the employees. A manger should consider these factors. It has been seen that the
Australian banks is not adequately captured the requirements of the prudential standards.
Banks are not following the remuneration practice guide of APRA. Therefore, a manger
should consider these issues and challenges related to remuneration policy. For example, a
manager should set the remuneration according to the APRA practice guide and the salary of
CEO should also be set according to the law (Boxall, Bainbridge, & Frenkel, 2018).
Issues related to performance management
A new manager in Australia will have to face problems related to employee
engagement, employee assessment, talent management, and employees’ absenteeism. There
is a high employee’s absenteeism record found in the Australian banking culture (The
Business Times, 2018). A new manager should motivate and encourage employees for
improving their absenteeism record. The work should be designed in such a way that it will
entertain the employees rather than frustrating them. For example, there should be proper gap
during work schedule, people should get leave on regular basis, and work from home

HR Issues in Australian Banking System
9
facilities should be available in the organisation. It means a manger should provide a flexible
work environment to the employees (AON, 2018).
Role of Royal Commission Recommendations to improve the HR issues in
Banking Organisations
The recommendations of Royal banking conditions help the organisation to improve
the working culture in the organisation. However, the Federal government of Australia and
top regulatory bodies of the country are following the recommendations of Royal
commission, making laws and comporting enforcement law agency to monitor such issues in
banks. However, the recommendation of Hayne report about HR practices is specially
focuses on organisational culture and ethical working behaviour of employees. Banks can
provide training and development programs that motivate people towards ethical practices
(Noe, Hollenbeck, Gerhart, & Wright, 2017). However, the leadership problem is also a
major problem for the banks. According to the recommendation of Hayne report, banks
should terminate those leaders or top executives of the organisation who were involved in any
unethical practices. However, the Hayne report also stated that do not overregulate these
organisations and urged political party to do not involve in any such strict action that affects
the business operation of banks.
Recommendations
One of the key problems in Australian banking organisations is managing
organisational culture and leadership issues. These problems should be resolved as soon as
possible for future growth and development of Australian banks. A new manager in Australia
should focus on ethical practices and improving the image of banks in the mind of common
people. Apart from this, issues related to remuneration, working conditions, employee
engagements, and employees’ self-confidence etc. are also some of the key challenge for a
new Australian manager. There are few recommendations that help to a new manager to
resolve these issues and challenges in Australia:
1. A new manager should understand the new working culture in Australian banks.
However, knowing the history of banks will also help him to understand the past
culture and working conditions.
2. As current Australian banking system is facing strong problems related to corruption,
unethical practices, discrepancies in salary structure, demotivation of employees, and

HR Issues in Australian Banking System
10
involvement of top executives in corruption and unethical practices, a new manager
should not tolerate any unethical practices in the organisation in future. He/she should
motivate people in the organisation. However, dealing with these adverse conditions
will definitely be a challenge for a new manager, but manager should deal these
conditions with calmness and patience.
3. Personal interaction with every person (top leaders to staff) in the organisation will
help the manager to understand the people and their culture. Understanding culture of
organisational people is essential for success of any organisation.
4. A new manager should promote ethical work culture and a good working environment
in the organisation that attract people and helps current people to work in the
organisation.
5. Manager should also establish a strong ethical and professional relationship with
remaining employees and leader of the organisation. It will help to understand the
culture and motive of people.
6. Manager should not tolerate any unethical practices or fraud in the organisation,
whoever the person. If manager founds anything wrong or unethical should complaint
about the problem to top authorities like APRA, RBA etc.
7. Set a standard remuneration policy in the organisation, which is based on the
performance of employees. Discrimination in performance management or in rewards
should not be practiced in the organisation.
Conclusion
In conclusion, the Australian banking system is currently facing strong ethical and
cultural issues. There are many other HR issues is also prevailing in Australian banking
sectors. A new manager in Australia should aware about these factors. Manager in any
organisation is responsible for promoting ethical organisational culture and maintain
workplace diversity. However, it is also a responsibility of every banking staff that they will
not involve in any unethical practice in the organisation. It will also help the bank to promote
its image in the mind of people. A manager should conduct training and development
programs in the organisation on regular basis to promote a positive work environment in the
organisation. If manager will work as a role model in the organisation, people in the
organisation will follow him and it further helps in improving job commitment of people.

HR Issues in Australian Banking System
11
References
AON (2018). Banking and Finance industries: Remuneration Report [online]. Retrieve from:
https://www.aonhewitt.com.au/getattachment/a0bf418f-d66e-46e6-8241-
99b92f5f0943/file.aspx?disposition=inline
APRA (2019). Industry Supervision [online]. Retrieve from:
https://www.apra.gov.au/supervision
Bernard, I.C. (2018). Self-preservation, as spinoza’s philosophical view. International
Review of Humanities Studies, 1(1), 18-26.
Boxall, P., Bainbridge, H., & Frenkel, S. (2018). Styles of HRM in Australia and New
Zealand [online]. Retrieve rom:
https://www.researchgate.net/profile/Hugh_Bainbridge/publication/323573161_Styles
_of_human_resource_management_in_Australia_and_New_Zealand/links/
5afa9c63a6fdccacab16bb82/Styles-of-human-resource-management-in-Australia-and-
New-Zealand.pdf
Brown, S. S. (2018). The role of the United Nations Global Compact in helping to drive
corporate social responsibility-related practices in the Australian banking sector
[online]. Retrieve from:
https://minerva-access.unimelb.edu.au/bitstream/handle/11343/213533/Scott
%20Brown_PhD%20thesis_FINAL_Public.pdf?sequence=2&isAllowed=y
Hayne Report (2018). Royal Banking commission into Misconduct in the Banking,
Superannuation and Financial Services Industry: Interim Report: Vol. 3 [online].
https://financialservices.royalcommission.gov.au/Documents/interim-report/interim-
report-volume-3.pdf
Hayne Report (2019). Royal Banking commission into Misconduct in the Banking,
Superannuation and Financial Services Industry: Final Report: Vol. 1 [online].
Retrieve from: https://www.royalcommission.gov.au/sites/default/files/2019-02/fsrc-
volume-1-final-report.pdf
Hayne Report (2019). Royal Banking commission into Misconduct in the Banking,
Superannuation and Financial Services Industry: Final Report: Vol. 2 [online].

HR Issues in Australian Banking System
12
Retrieve from: https://www.royalcommission.gov.au/sites/default/files/2019-02/fsrc-
volume-2-final-report.pdf
Jennett, G. (2019). Banking royal commission delivered a manifesto for political action, so
when will we see it? [online]. Retrieve from: https://www.abc.net.au/news/2019-02-
05/kenneth-hayne-royal-commission-report-labor-versus-liberals/10779476
Landmann, H. & Hess, U. (2018). Testing moral foundation theory: Are specific moral
emotions elicited by specific moral transgressions?. Journal of Moral
Education, 47(1), 34-47.
Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2017). Human resource
management: Gaining a competitive advantage [online]. Retrieve from:
file:///C:/Users/System04104/Downloads/51.pdf
Oates, G. & Dias, R. (2016). Including ethics in banking and finance programs: teaching “we
shouldn’t win at any cost”. Education+ Training, 58(1), pp.94-111.
Otoo, F. N. K. (2019). Human resource development (HRD) practices and banking industry
effectiveness: The mediating role of employee competencies [online].
https://www.emeraldinsight.com/doi/abs/10.1108/EJTD-07-2018-0068
Paulet, E., Parnaudeau, M. & Relano, F. (2015). Banking with ethics: Strategic moves and
structural changes in the banking industry in the aftermath of the subprime mortgage
crisis. Journal of Business Ethics, 131(1), pp.199-207.
Reserve Bank of Australia (2018). Equity and Diversity [online]. Retrieve from:
https://www.rba.gov.au/publications/annual-reports/ead/2018/pdf/diversity-initiatives-
and-profile.pdf
Reserve Bank of Australia (2018). Our Role [online]. Retrieve from:
https://www.rba.gov.au/about-rba/our-role.html
Reserve Bank of Australia (2018). The Australian Financial System [online]. Retrieve from:
https://www.rba.gov.au/publications/fsr/2018/apr/australian-financial-system.html
Robertson, A. (2018). Banking royal commission: Does this prove banks are not an ethical
investment? [online]. Retrieve from: https://www.abc.net.au/news/2018-05-04/does-
royal-commission-prove-banks-are-not-an-ethical-investment/9728560

HR Issues in Australian Banking System
13
Ryan, P. (2019). Litigation funder sets up shop in Australia to profit from banking royal
commission [online]. Retrieve from:
https://www.abc.net.au/news/2019-01-28/litigation-funder-in-australia-to-profit-from-
royal-commission/10755130
SBS News (2019). Banking sector crackdown hits parliament [online]. Retrieve from:
https://www.sbs.com.au/news/banking-sector-crackdown-hits-parliament
The Business Times (2018) More than half of Westpac shareholders vote against exec pay
[online]. Retrieve from: https://www.businesstimes.com.sg/banking-finance/more-
than-half-of-westpac-shareholders-vote-against-exec-pay
Verrender, I. (2019). Post royal commission report, banks will start a new lobbying
campaign — but customers pick up the bill [online]. Retrieve from:
https://www.abc.net.au/news/2019-02-04/royal-commission-banks-customer-will-
pay/10778394
William, R. (2018) Ethics in banking? That's a negative [online]. Retrieve from:
https://www.smh.com.au/business/banking-and-finance/ethics-in-banking-that-s-a-
negative-20180814-p4zxf1.html