When the royal commission's final report is made public on Monday, arguably the most important question that Commissioner Kenneth Haynemust answer is the one that will garner the fewest headlines.
It is: what can Hayne practically do to improve the culture of Australia's financial services sector?
Quite appropriately, the focus on Monday will be on the industry's Judgment Day. That starts with the civil and possible criminal legal action stemming from the examples of misconduct examined by the commission, and also includes the reforms Hayne might suggest in areas such as mortgage broking, lending, financial advice, insurance and superannuation.
Of course, much of this is backwards looking, and focused on laws, rules, obligations or ethics that have been breached in fact or spirit.
Even the reforms that could change the sector in the future – such as changing commission structures in mortgage broking, or further attacking conflicted remuneration, or giving regulators more power and resources – are about cleaning up behaviour, problems or conflicts of interest that have not been adequately addressed in the past.
There's no better example than the prospect of Hayne introducing reforms to make banks lend more responsibility.
But this industry is underpinned by what Hayne has described as adequate laws and reasonable if flawed regulators.
It's a sector chock-full of risk officers, lawyers and compliance staff. Beyond enforcement, will Hayne explain how the sector got itself into this mess, and help ensure it doesn't end up there again?
A definition of culture remained unsurprisingly elusive. CEOs and chairmen told Hayne it's partly vision, partly rules written and unwritten and mostly just the way we do things round here – in the immortal words of the Dennis Denuto, that inspiring lawyer from the movie The Castle, it's the vibe.
The closest we got to an example of what a good culture looked like came from some will see as a unlikely source: former Macquarie Group chief Nicolas Moore.
He explained that a key tenant of Macquarie model is that executives are encouraged (including through remuneration) to stay with the business for long periods, such that they "live with" the decisions they make.
The other key, Moore said, was"That everybody in the organisation, no matter what role, have to actually feel they're accountable for the outcome that they deliver. And that consciousness, we think, is the greatest safeguard we have in terms of the long-term health of the organisation and the client outcomes," Moore said.
This idea of individual accountability is not as enshrined in Australia's financial services sector as it is in other jurisdictions, such as the United States, Canada, Singapore and India.
Unlike in Australia, where firms are licensed, and it is generally products that are regulated, a number of overseas jurisdictions require that senior executive with fiduciary are licensed across a range of functions – and not just retail-facing ones. This has been part of the American system since the 1940s.
Would Hayne go so far as to recommend licensing regime for Australia's banks? It appears unlikely, although such a regime is possible (and advisable) for financial advisers.individual accountability.
But Chris Whitehead, the Australian chief executive of financial services sector professional body FINSIA, argues that an increased level of individual accountability is warranted and should be embraced by a sector so apparently desperate to win back the trust of the community.
And if Hayne doesn't recommend this, the industry should act.
Whitehead argues that having a system were individuals could be kicked out of an industry – in the same way a doctor or lawyer can be struck off – would help lift standards and actually make life easier for executives, who would be empowered to raise problems and address conflicts across the entire value chain of the financial services sector.
Licensing is one solution, but FINSIA says implementing global standards around education and professionalism, and introducing enforceable codes of conduct, would be a less radical but effective step to help cement the importance of individual accountability. NatThe government's Banking Executive Accountability Regime is a step towards more formally enshrining individual accountability. Whether Hayne recommends it or not, if the broader industry cares as much about culture as it makes out, it should seize the change to examine overseas models and lead sectoral change.urally, it would like to play a role in setting these standards.
That culture is central to his deliberations would seem to be evident from the final two weeks of the commission's public hearings last November. That word "culture" was mentioned 471 times (yes, Chanticleer counted) over those 10 days, as Hayne and his team tried to get to the heart of how these companies actually operate.
The government's Banking Executive Accountability Regime is a step towards more formally enshrining individual accountability. Whether Hayne recommends it or not, if the broader industry cares as much about culture as it makes out, it should seize the change to examine overseas models and lead sectoral change.