Shocking misconduct that has emerged from the banking royal commission is likely to be repeated as short memories allow complacency to gradually return, former Australian Competition and Consumer Commission chairman Graeme Samuel has warned.
Professor Samuel, who headed the ACCC between 2001 and 2011 said, despite the “shock factor” from admissions and evidence outlined at the royal commission, misconduct in financial services was almost certain to repeat.
“History has shown that lessons — even as harsh as the global financial crisis — have a short memory time span and complacency sets in very quickly,” he observed.
“We will and should see a spurt of cultural and governance reform over the next couple of years, but then there will be a gradual lapse back into the course of misconduct we are now seeing in the royal commission.”
Professor Samuel told a Customer Owned Banking Association (COBA) conference in Melbourne that the royal commission had exposed “horrifying evidence of outrageous misconduct at our previously revered financial institutions”.
In the royal commission’s interim report released a fortnight ago, commissioner Kenneth Hayne referred to “a culture of greed” and outed the two key financial regulators ASIC and APRA as being ineffective by favouring deals, such as enforceable undertakings, over prosecutions.
Mr Hayne slammed the regulators for failing to mark and enforce the bounds of permissible behaviour, saying the misconduct either went unpunished or the consequences did not meet the seriousness of what occurred.
Professor Samuel believes a specialised group of judges with expertise in complex corporate and securities law needs to be established and maintained to rule on cases.
He says the Federal Court currently does this, but questions whether those Federal Court judges “have an expert knowledge of highly complex notions of corporations and securities law”.
‘Inner glow’ of ‘mixing it with the big end of town’
Professor Samuel believes the greatest risk for regulators is “industry capture” where young members of agencies consider their post-regulatory careers while they are investigating or prosecuting while-collar crime.
“The invitations to entertainment events, the private luncheons, in fact anything that gives the vulnerable regulator the satisfaction or inner glow that they are mixing it with the big end of town,” Professor Samuel said.
Professor Samuel singled out senior regulators, who often spent time at major international institutions, he argued with the ambition of seeking overseas posts to undertake at the end of their regulatory career.
“Being [an executive at] a significant regulatory institution is a serious, full-time responsibility and does not allow for these substantial diversions from the duties of office,” Mr Samuel said.
Professor Samuel was speaking in his role with the Monash Business School at Monash University.
Since leaving the ACCC he has taken on a number of roles, including one as a panel member for the APRA investigation into culture, accountability and governance at the Commonwealth Bank.