APRA’s new psychology team takes regulation to the next level

My latest column for The CEO Magazine looks at the bank regulator’s latest enthusiasm: changing banks’ cultures.

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.

This and other CEO Magazine columns are here; follow me on Twitter @shorewalker1.

About David Walker

David Walker runs editorial consultancy Shorewalker DMS (shorewalker.net), editing and advising business and government on reports and other editorial content. Newsletter: https://shorewalker.net/subscribe . Among other roles, David has edited the award-winning Acuity and INTHEBLACK magazines, been chief operating officer of online publisher WorkDay Media, held senior policy and communications roles at the Committee for Economic Development of Australia and the Business Council of Australia and run the website for online finance start-up eChoice. He is a former economics writer for The Age and News Ltd. He has qualifications in law and corporate finance.
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