2.2 Changing culture

As I have said, each financial services entity is responsible for its own culture. Each must form a view of its culture, identify problems, develop and implement a plan to deal with them, and then determine whether the changes it has made have been effective.

Doing this will take time and effort. How much time and how much effort are shown by what ANZ has been doing.

Mr Elliott said that, during 2016, ANZ’s internal audit team designed a cultural assessment tool, focused on organisational culture.[1] The tool measures four key ‘levers’ that are thought to affect ANZ’s culture and the way that people within ANZ work:[2]

  • leadership (tone from the top);
  • middle management (tone from the middle);
  • risk environment; and
  • transparency (‘speak up’ culture).

The internal audit team makes its assessments in four steps. First, it engages with ‘business leadership’ to clarify the assessment process and determine its scope, and to seek input on the questions that it will ask.[3] Second, it conducts an online survey of the relevant employees, with a target response rate of 60%.[4] The team then undertakes a statistical analysis of the data returned.[5] Third, it conducts focus groups and individual interviews to clarify what are the cultural strengths and challenges, and it undertakes associated root cause analysis.[6] Fourth, it engages with the business about the outcomes of the survey.[7] ‘Engagement with the business’ has a number of different aspects, including:[8]

  • presenting an executive summary to the leadership team;
  • the leadership team developing an action plan over a threemonth period, with oversight from the internal audit team; and
  • continuing engagement with management to discuss the effectiveness of the agreed actions, with further formal re-assessments undertaken as needed.

By 30 June 2018, ANZ’s internal audit team had conducted more than 30 culture assessment reviews, covering more than 21,000 of ANZ’s employees.[9] Sixteen of those assessments were completed in ANZ’s 2018 financial year.[10] ANZ has begun re-assessing certain business units so that it can evaluate how the culture of those units has changed over time.[11] Mr Elliott explained the need for re-assessment by saying that sampling needs to be done ‘on a regular basis so that you can see change. Otherwise … it’s all very interesting, but [without] see[ing] any actual outcome, it’s largely pointless’.[12]

When asked how the results of these audits were received by the relevant business units, Mr Elliott said:[13]

[W]hen this first idea came up, I have to admit I was a little sceptical about doing a cultural audit, how exactly would that work, what exactly would they ask, how reliable would the data be, because we already do a lot of surveys. So we piloted it … And the feedback from the team, the recipients, a very senior person at the bank … was that this [feedback] was enormously valuable information, and it gave them the ability to not only get this feedback, but do something about it.

Mr Elliott said that this work had played a part in changing ‘the culture and the conversation at the most senior level of the bank’ and he said that his team, the Board and the Human Resources Committee all cared about, and are giving consistent consideration to, the results of the culture audits.[14]

In addition to these area-based culture reviews, ANZ also undertakes much larger-scale culture reviews. Every year or two years, ANZ conducts entity-wide ‘My Voice’ surveys.[15] The 2018 survey received more than 15,000 responses.[16] Mr Elliott described the findings of these surveys as ‘an incredibly valuable piece of data’, because, he said, they tell ANZ what its staff ‘really think’ about the business.[17]

In its most recent report on banking culture, the G30 identified what it said were some of the ‘key lessons … repeatedly raised in the interviews by financial sector leaders as they reflected on the lessons learned and the future of banking culture’:[18]

  • ‘Managing culture is not a one-off event, but a continuous and ongoing effort that must be integrated into day-to-day business operations.
  • ‘Leadership always matters, and banks must embed conduct and culture messages and expectations from the top down, through middle management down to the teller in their organization. There is increasing awareness that tone from above is as important as tone from the top, and this requires a shift in how managers at all levels of the organization are trained, promoted and supported.
  • While cultural norms and beliefs cannot be explicitly measured, the behaviours and outcomes that culture drives can and should be measured’.

The G30 also observed that the decade since the GFC had been a decade of ‘slow progress and uneven results’ for banking culture.[19]

It cannot be doubted that reform of organisational culture is difficult. Dr Henry said that it could take 10 years to embed the culture that NAB was striving to achieve.[20] Mr Elliott was more optimistic. He said that with an ‘obsessive focus by management to say that [culture] is really important [and] to lead by example’, cultural shifts could begin to be seen within two or three years.[21]

As I have said, every financial services entity, named in the Commission’s reports or not, must look to its culture. Given the conduct and events described in the Commission’s reports, some entities must change their culture and their governance. That will require continuing effort ‘integrated into daytoday business operations’. It will require leadership from within the entities and continued attention by boards, senior executives and others within the entities as well as consideration and attention by APRA as prudential regulator.

Recommendation 5.6 – Changing culture and governance

All financial services entities should, as often as reasonably possible, take proper steps to:

  • assess the entity’s culture and its governance;
  • identify any problems with that culture and governance;
  • deal with those problems; and
  • determine whether the changes it has made have been effective.

What entities must do can be stated in the form of a recommendation expressed only at a level of generality that some may too easily say ‘does not apply to us’. But it does. It applies to every financial services entity, named or not named in the work of the Commission. And to ignore the recommendation would be foolish and ignorant. It would be foolish because one of the chief lessons financial services entities must take from the work of this Commission is that every entity is and must be accountable for what it does. It would be ignorant because those who will not learn from history will repeat it.

What the Recommendation requires is much more than an exercise in ‘boxticking’. Its proper application demands intellectual drive, honesty and rigour. It demands thought, work and action informed by what has happened in the past, why it happened and what steps are now proposed to prevent its recurrence. Above all, it demands recognition that the primary responsibility for misconduct in the financial services industry lies with the entities concerned and with those who manage and control them: their boards and senior management.

The Recommendation, although it is expressed generally, can and should be seen as both reflecting and building upon all the other recommendations that I make. As I have explained in the introduction to this Report, all of the recommendations are informed by underlying principles that reflect basic norms of conduct and seek to answer four key questions. That is why, in the Introduction, I set out the recommendations not only in the order in which they appear in this Report but also in a way that drew out connections between them. This particular Recommendation requires entities to take all that is set out in this Report, including all the other recommendations that are made, and apply, re-apply, and keep re-applying what is said to their culture and their governance.

Recommendation 5.7 – Supervision of culture and governance

In conducting its prudential supervision of APRAregulated institutions and in revising its prudential standards and guidance, APRA should:

  • build a supervisory program focused on building culture that will mitigate the risk of misconduct;
  • use a riskbased approach to its reviews;
  • assess the cultural drivers of misconduct in entities; and
  • encourage entities to give proper attention to sound management of conduct risk and improving entity governance.


[1] Transcript, Shayne Elliott, 29 November 2018, 7344.

[2] Transcript, Shayne Elliott, 29 November 2018, 7345; Exhibit 7.136, 4 October 2017, Internal Audit Culture Assessment Board Presentation, 6, Appendix 1.

[3] Transcript, Shayne Elliott, 29 November 2018, 7345; Exhibit 7.136, 4 October 2017, Internal Audit Culture Assessment Board Presentation, 7, Appendix 1.

[4] Transcript, Shayne Elliott, 29 November 2018, 7345; Exhibit 7.136, 4 October 2017, Internal Audit Culture Assessment Board Presentation, 7, Appendix 1.

[5] Transcript, Shayne Elliott, 29 November 2018, 7345; Exhibit 7.136, 4 October 2017, Internal Audit Culture Assessment Board Presentation, 7, Appendix 1.

[6] Transcript, Shayne Elliott, 29 November 2018, 7345; Exhibit 7.136, 4 October 2017, Internal Audit Culture Assessment Board Presentation, 7, Appendix 1.

[7] Transcript, Shayne Elliott, 29 November 2018, 7345; Exhibit 7.136, 4 October 2017, Internal Audit Culture Assessment Board Presentation, 7, Appendix 1.

[8] Transcript, Shayne Elliott, 29 November 2018, 7345; Exhibit 7.136, 4 October 2017, Internal Audit Culture Assessment Board Presentation, 7, Appendix 1.

[9] Transcript, Shayne Elliott, 29 November 2018, 7346.

[10] Transcript, Shayne Elliott, 29 November 2018, 7346.

[11] Transcript, Shayne Elliott, 29 November 2018, 7346.

[12] Transcript, Shayne Elliott, 29 November 2018, 7348–9.

[13] Transcript, Shayne Elliott, 29 November 2018, 7348.

[14] Transcript, Shayne Elliott, 29 November 2018, 7349.

[15] Transcript, Shayne Elliott, 29 November 2018, 7350.

[16] Transcript, Shayne Elliott, 29 November 2018, 7350.

[17] Transcript, Shayne Elliott, 29 November 2018, 7351.

[18] G30, Banking Conduct and Culture: A Permanent Mindset Change, November 2018, xiixiii.

[19] G30, Banking Conduct and Culture: A Permanent Mindset Change, November 2018, xiixiii.

[20] Transcript, Kenneth Henry, 26 November 2018, 7115.

[21] Transcript, Shayne Elliott, 29 November 2018, 7354.