Recommendations for Australian Finance Industry

TASK 3 1
In the wake of the initiation of the inquiry into the misconducts of the financial sector by the
Royal Banking Commission, a list of 76 recommendations have been proposed for the
Australian finance industry (Johnson, 2019). The two of the proposed recommendations are
explained as follows.
One of the major identified in the said financial misconducts is stated to be the “issue of
remuneration and rewards” for the individuals, which is stated to be the root cause of all the
issues in the financial services industry. Thus, as recommended by the Royal Banking
Commission, a great extent of efforts are needed to improve the remuneration and overall
governance culture by the companies, on lines of the guidance of the Australian Prudential
Regulation Authority (APRA). It has been recognised in the report of the commission, that
there is a direct connection between the “conduct and reward.” In the words of the
commissioner, the conduct of the entities are either driven by the pursuit for the profits or
individual greed for personal gains. In this relation, APRA is prescribed to conduct prudential
supervision of remuneration systems, and revise the standards and guidelines as per the
Financial Stability Board’s publications (PWC, 2019). This includes sound management of
non-financial risks in the remuneration systems, to claw back remuneration that has vested
when appropriate, and the quality information being provided about risk management
performance and remuneration decisions to the board and committees.
I believe, it would be a significant move towards the enhancement of the overall corporate
culture which is comprised of tangible financial benefits through which the prime objectives
of the businesses such as the employee attraction and retention, customer satisfaction and
ultimately, shareholder value are achieved. If the variable remuneration structures are
efficiently designed, ethical behaviour and compliance with laws and standards would be
promoted in the organisations. Therefore, it would be appropriate to establish such reforms in
the organisations.
The second major recommendation that has been proposed by the Royal Banking
Commission for the financial sector are in the form of reformatory measures for the farmers
and small businesses. One of which is the provision of compensation scheme as a last resort
means to allow the cased being heard of the consumers and small businesses, who have been
failed by financial firms (Chalmers and Worthington, 2019). Another measure that has been
recommended for the farmers and small businesses is the creation of a national farm-debt-
mediation scheme, which is aimed at assisting the borrowers to address financial difficulties