APRA is now doing what the Dutch have done for several years now: bring in a team of organisational psychologists to work out what drives behaviours within a bank, and then fix the risky behaviours.
On the one hand … wow. This is a pretty big step in business regulation. Prudential regulation has always been a bit more in-your-face than most regulation, but this takes it to the next level. And quite a few regulatory experts doubt this ambitious project will work. The literature on cultural transformation doesn’t give much cause for confidence either.
One the other hand, you can see why APRA is going there: many bank supervisory problems start with behaviour, and you can’t change that with just rules and regulations.
And I am reluctant to criticise this project, on standard Troppodillian grounds: it’s an interesting experiment that aims to help solve a very tough problem, and we should let APRA have a go at it. We should know the outcome by, well … 2035 or so.
Whatever the outcome, it certainly does suggest APRA is taking its job – and particularly the recent CBA strife – seriously.