Analysis of MRCB Bank's Breaches in Financial Regulations and Ethics

This report analyzes the financial misconduct of Monash Retail Commercial Bank (MRCB) in Australia, focusing on breaches of financial regulations, ethical standards, and corporate social responsibility. The report details several incidents, including the bank's practice of automatically increasing cre...Read More

Financial Markets and Institutes in
Australia

Table of Contents
Question 2..................................................................................................................................3
Answer 2....................................................................................................................................3
References..................................................................................................................................6

Question 2
Are the incidents reported by MRCB in the initial inquiries in breach of a) Australian
financial regulations, b) ethics, and/or c) corporate social responsibility? Explain why.
Answer 2
The Monash Retail Commercial Bank (MRCB) indulged in banking misconduct. The
customers of the bank were unable to service their credit card debt. The bank was indulged in
offering automatic increases in the limits of the credit card. The bank increased the limits
without any type of inquiry related to the current employment status and the income of the
customers. The bank offered this service just by analysing the history of the repayment of the
customers.
As per the Australian financial regulations, it is the responsibility of the lenders to make
reasonable inquiries related to the finances of the consumers, verification related to the
financial situation of the consumers, inquire about the objectives and the requirements of the
consumers and make sure the credit contract offered to the consumer is suitable. The bank
had not performed the essential inquiries related to the financial status, situation and
requirements of the consumers. It has been found in the case that the bank increased the
limits of credits without such important inquiries and not complying with the Australian
financial regulations is breaching the code of conduct, ethics and regulations. The increase in
the limits of the credit card resulted in the increased credit card debt of the consumers. The
consumers became unable to repay the credit amount to the bank. This can be said that it is
the fault of bank as no such inquiries were initiated by the bank related to requirements of the
consumers and financial conditions but they automatically increased the credit limits. This is
not sufficient for the bank to analyze the history of the repayment of the credit by the
consumers. The breaching of the mandatory regulations resulted in such type of situation to

the customers. This shows that the bank had not followed the ethics and code of conduct as
well as breached the Australian financial regulations.
An incident of complaint by the customers to the bank related to financial planning arm of
MRCB that a financial planner misled the customer for investing in the financial product that
is highly risky. The investment in the highly risky financial product made the customer
suffered the loss of $1 million in retirement savings.
According to ASIC, it is important for the bank to have license. For obtaining the license, it is
important for the bank to have appropriate conduct, supervision and training of the staff,
compliance, adequate resources, minimum financial requirements and the information related
to product disclosure (ABC, 2016). It is important for the banks to comply with the code of
conduct, should be responsible for the resolution of the disputes, provide the guidance to the
customers, provide with the product disclosure statements and the statement of advice
(Cooper, 2006). It has been found in the case that the financial planner at MRCB misled the
customers and made him invest in the highly risky financial product. This means that the
financial planner might not have proper knowledge which resulted in the loss of $1 million to
the customers. Hence, it can be said that incident reported by MRCB in the initial inquiries
was the case of breach of Australian financial regulations by the bank. This is because; it is
the responsibility of the bank to provide the guidance to the customers so that the customers
will be able to achieve profits through the investment in the financial product. The wrong
advice to the customer made him suffered the loss and it broke the trust of the customer
towards the bank. The bank and the financial planner of the bank are responsible for
supporting the consumers to make decisions related to the investment in the financial
products. The banking organizations work for the benefits of its consumers and the
consumers believe that the financial planners will provide the support so that they can obtain
the profits through the investment (Erskine, 2014). Misleading the consumers breaks the trust

of the consumers. Consequently, the incident shows that the bank breached corporate social
responsibility, ethics and regulations through such actions (Hardwick & Geffen, 2018).
Apart from this, the bank had not credited the customers having FastTrack Saving Account
with the bonus interest for 6 months. It has been found through the investigation that the error
occurred due to a glitch in the system.
This indicates that the bank had not followed the regulations. According to the Australian
financial regulations, when the consumer deposits a specific amount of money in the savings
accounts and do not withdraw money from the savings account in the month then the interest
is paid to the consumer and the bonus interest for each month is transferred in the account on
last business day of the month (ANZ, 2018). It is mandatory for the banks to transfer the
interest in the savings account of the consumers. It is the policy that the bank has to follow in
order to provide the benefits to the consumers as they open a savings account in bank in order
to earn interest on the deposit money in the bank (Paterson & Mallesons, 2018). MCRB had
not credited bonus interest in the accounts of the customers for 6 months which is against the
regulations and banking policy. Hence, it can be said that the bank breached the ethics and
the regulations as well as breached corporate social responsibility.
These incidents of the bank show that the bank engaged in misconduct and failed to comply
with the standards of the community. It is the mandatory for the bank to comply with the
legal standards and the mandatory regulation in order to meet the expectations and the
standards of the community (RBA, 2018). The breaching of the ethics is included under the
misconduct of the financial regulations. Apart from this, it is the responsibility of the senior
management of the bank to investigate whether the employees of the bank is following the
ethical practices and behaving ethically or not. It is also important for the bank to provide the
information and training to the employees about the rules, regulations, ethics and the
corporate social responsibility (Reynolds, 2018).

References
ABC. (2016). Fact check: Can ASIC do the same job as a financial industry royal
commission? Retrieved from www.abc.net.au: http://www.abc.net.au/news/2016-06-
09/fact-check-asic-royal-commission-powers/7447682
ANZ. (2018). Earning interest on your bank account. Retrieved from www.anz.com.au:
https://www.anz.com.au/content/anzcomau/en/personal/bank-accounts/guides/
earning-interest.html
Cooper, J. (2006). The integration of financial regulatory authorities – the Australian
experience. Retrieved from download.asic.gov.au:
http://download.asic.gov.au/media/1339352/integration-financial-regulatory-
authorities.pdf
Erskine, A. (2014). Regulating The Australian Financial System. Retrieved from
australiancentre.com.au:
https://australiancentre.com.au/wp-content/uploads/2016/04/FAF2-Regulation.pdf
Hardwick, J., & Geffen, S. (2018). Australia: What you need to know about the Royal
Commission into the financial services sector. Retrieved from www.mondaq.com:
http://www.mondaq.com/australia/x/669858/Financial+Services/What+you+need+to+
know+about+the+Royal+Commission+into+the+financial+services+sector
Paterson, I., & Mallesons, K. &. (2018). Banking regulation in Australia: overview.
Retrieved from uk.practicallaw.thomsonreuters.com:
https://uk.practicallaw.thomsonreuters.com/w-006-9098?
transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1
RBA. (2018). Australia's Financial Regulatory Framework. Retrieved from www.rba.gov.au:
https://www.rba.gov.au/publications/annual-reports/cfr/1999/aus-fin-reg-frmwk.html

Reynolds, S. (2018). Royal Commission report into misconduct in the banking,
superannuation and financial services industry. Retrieved from
www.shanereynolds.com.au:
http://www.shanereynolds.com.au/wp-content/uploads/2018/01/Submission-to-High-
Court-Judge-The-Hon-Kenneth-Madison-Hayne-AC_final.pdf