BAFN200 Assignment: National Australia Bank and Ethics in Finance

This essay examines the significant impacts on National Australia Bank (NAB) resulting from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The report emphasized ethical and moral principles, including customer service, fair practices, and consumer protection. The essay discusses how the commission's recommendations will affect NAB's operations, particularly in areas like staff remuneration, mortgage broker commissions, and executive accountability. The essay highlights the need for NAB to transform its governance, culture, and remuneration practices to foster an ethical and customer-centric banking environment. The essay also touches upon the need for NAB to simplify its services, restore customer trust, and build a banking culture that prioritizes the customer's best interests. Overall, the essay underscores the necessity for NAB to adopt a code of ethics that drives a customer-oriented approach.

Running Head: Ethics in Finance
Ethics in Finance
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Ethics in Finance
Discuss the effects on National Australia Bank following the report from
the Royal Commission into Misconduct in the Banking, Superannuation
and Financial Services Industry.
Royal Commission report (2019) focuses on the transformation of the banking sector to
promote consumer interests and to encourage a cultural shift towards consumer service.
These recommendations are based on general ethical and moral principles like obeying the
law, not misleading the customers, acting in a fair manner, providing services according to
the customer suitability, applying reasonable care and due diligence while providing services
to the clients and always acting in the best interests of the consumers.
The commission used harsh words against the Banking sector including National Australia
Bank (NAB) regarding their business practises and it has made several recommendations. So,
this report will affect NAB in various ways.
The effect of these recommendations will be seen on the remunerations of its staff to change
their focus from sales to consumers. Like, the incentives of the retail staff will not be directly
based on sales performance. In order to promote ethical behaviour, the commission
recommends a provision to claw back vested remuneration in case of serious misconduct to
strengthen the accountability for senior management and other risk-takers.
The commission has made it necessary for the mortgage brokers to act in the best interests of
the borrower and it will require NAB to stop paying trailing commissions to its brokers. This
step may impact the competitiveness of the mortgage market but it will remove the conflict of
interest between customers and bank mortgage brokers, because now they will not
recommend high mortgage or unsuitable products to the borrowers. The bank will now also
need to monitor the duties performed by the broker and if any misconduct is found, then it
has to investigate whether the broker acted poorly in earlier cases. It will be a duty of the
bank to inform the customer who is affected by those misconducts and to remediate quickly.
The bank will need to expand its executive accountability regime because the commission
requires it to track the employees who are responsible for any breaches of lending laws. This
increased accountability will have an impact on the ethical standards followed by the bank as
no breach will now go unnoticed.
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Ethics in Finance
The Commission has asked NAB to close the gap between what it says and what it actually
does. So, the bank will quickly need to take an affirmative action to simplify its services to
restore customer trust. Like, it has to stop charging default interest to drought-impacted
farmer’s accounts, it has to remove grandfathered commissions for its financial planning
advisers, it has to amend its business practices to include the voice of the customers in the
decision-making and it has to build a banking culture that always puts the customer first.
Overall there will be a significant impact on NAB as it needs to have a code of ethics which
will transform its operations to ensure that every time there is a best possible outcome for
their customers. NAB needs to improve its Governance, Culture and Remuneration as all
these moves together and improvements in each area will lead to a banking culture which is
ethical and customer oriented.
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Ethics in Finance
References:
Attorney-General’s Department Australian Government. (2019). Royal Commission into
Misconduct in the Banking, Superannuation and Financial Services Industry.
Retrieved 3 April 2019 from
https://www.ausbanking.org.au/images/uploads/Volume_1_-_accessible.pdf
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