Banking Royal Commission – Beware unintended consequences!

  • 17 January, 2019
  • Greg Pierlot

The past year for the finance industry has been one of massive change and turbulence, being driven by the revelations of the Banking Royal Commission and other Enquiries.

Banks and Brokers alike have been rightly exposed to searing criticism. At its core has been self-interest! Putting sales and profit ahead of the interests of the customer!

Banking Royal Commission – Positive intentions! Negative impact?

Appropriately, when the deficiencies in culture and processes were highlighted by the Commission, the Banks quickly took steps to remedy the situation and avoid a reoccurrence.

However, whilst the intent was to drive needed change, the response has seen:

  • A heightened, almost zealous, focus on compliance
  • Loan applications being assessed in granular detail
  • Soaring information, documentation and paperwork requirements (Ask anyone who has recently applied for a home loan or a small business loan)
  • A significant tightening of credit standards (Never a bad thing when appropriately applied)

The situation has been further exacerbated by the downturn in the property market, which had clearly become overheated.

The customer pays the price!

Unfortunately, what started out as a well-intentioned change, has transformed from a ripple into a tidal wave in terms of impact at the customer end:

  • Processes have become very systemised and clinical
  • Those dealing directly with the customer, have little real authority to use commercial discretion where an applicant’s circumstance may warrant this
  • It now takes far longer to get a loan approved

In such an environment, it is the customer that loses!

Centralised control delivers an internal focus!

A centralised controlled environment may eliminate some poor behaviour by the minority, but at present, it lacks commercial application and flexibility. It is internally focused – not customer focused!

To drive a change in culture, requires a shift in focus and leadership.

Meaningful, customer focused change rarely arises through increased bureaucracy or over compliance!

You cannot be customer focused looking over your shoulder!

The vast majority of Bankers (at all levels) and Brokers care deeply for their clients and work exceptionally hard to provide support and meet their needs.

However, this reality has been overshadowed by the actions of the few and changes to organisational values which over time became distorted.

Frontline personnel are increasingly hamstrung and frustrated with the response to the Banking Royal Commission which, whilst well intended, is making it harder for them to deliver a quality customer experience.

Non Bank Lenders have prospered!

As it has become harder for businesses and individuals to readily access the finance they need, many have turned to more nimble online suppliers and second tier financiers.

The reality is the harder traditional Lenders make it for clients to source finance, the more appealing such providers become – even if the cost is higher! Businesses and individuals need finance and they will go to where it is available!

Unless the Banks have the freedom to revert to a more balanced, commercial approach to lending, then more and more frustrated customers will have no option but to seek finance from available alternate providers.

Whilst non-Bank Lenders have a critical role to play in the industry,  what is occurring is not necessarily in the best interests of the customer!


Finance plays such a critical role in our community and whilst there will be periods where some tightening is required, this needs to be carefully managed.

When finance is difficult to obtain, or the process protracted, the “knock on” to the community and economy can be enormous.

Whilst clearly changes were needed within the Finance Industry, it is important not to lose sight of the fact, that in the main, the Finance Industry has served the community well and the vast majority of Bankers, have their customers interests at heart.

As we go through this process, a balanced approach is needed. Critically, the implications of changes to policy and processes need to be carefully considered.

If not, the potential exists for the “cure” to end up killing the patient!