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World regulators united on culture drive: Deloitte

Global moves to regulate the culture of financial services organisations will come on top of local laws, Deloitte says in a new report.

“Recent years have seen conduct and culture within financial institutions come under intense scrutiny,” it says.

“While high-profile enforcement actions for misconduct may wane [next year] – albeit with national exceptions – the industry’s culture and conduct in the Asia-Pacific region will continue to face strong supervisory and regulatory policy focus.”

Deloitte says regulators across the region are united on the importance of culture and conduct, and are talking to each other about possible measures to assess these.

“At the international policy level, the Financial Stability Board now sees misconduct as a systemic risk,” the report says. “This represents a significant elevation of the topic.”

Deloitte expects regulators to focus on strong supervisory measures to ensure companies have the right culture and conduct.

In Australia this will result in new regulations under the Federal Government’s response to the Financial System Inquiry.

“These will see the introduction of a product governance responsibility, product intervention powers for the conduct regulator, stronger sanctions and a professional standards framework for financial advisers,” Deloitte says.

“We believe an effective response to these issues would include maintaining a strong awareness of regulatory trends, particularly those from outside the region.

“We are already seeing many institutions developing strong risk frameworks for managing conduct risk and, with more difficulty, considering how they can prove the artefacts of good culture to regulators.”

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