APRA chairman Wayne Byres says stronger regulation of the financial sector is unavoidable when industry players fail to properly police themselves.
Citing widespread selling of consumer credit insurance and slack lending standards called out at last year’s royal commission, Mr Byres says companies have demonstrated reluctance to do the right thing if there is a financial consequence.
Mr Byres told an audience in Sydney on Thursday he would like to see stronger self-regulation, with government and regulators such as the Australian Prudential Regulation Authority unable to restore trust in the financial sector on their own.
“Wearing short-term commercial cost is inevitably difficult, even when it is the right thing to do,” Mr Byres told the Banking and Finance Oath Conference.
“A stronger foundation of professionalism, more akin to that for lawyers, accountants and actuaries, would no doubt help.”
Mr Byres said cost was regularly cited by those at the top of institutions as to why they do not do the right thing by customers.
“We often hear executives complain they would like to curb a certain practice or stop selling a particular product but would suffer first-mover disadvantage,” Mr Byres said.
“This was a classic excuse in APRA’s intervention in mortgage lending: many industry participants were uncomfortable that competition was eroding sound lending standards but no one felt they could stand against the tide.”