Creating a balanced scorecard
Wayne Byres, Chairman - Speech to the Walkley Business Journalism Awards Finalists Announcement in Sydney.
Thank you very much for inviting me to speak at this important occasion.
Although it may not always be thought about this way, business journalism is a significant part of the regulatory system. Business journalists play an important role serving the community: informing Australians about events in the corporate and financial sector, assisting them to understand complex financial concepts and issues, highlighting risks and potential harms, and, where necessary, helping to hold companies and institutions to account.
So I thought I might make a few remarks today about one of the key challenges faced by regulators (journalistic or otherwise): balancing competing perspectives.
For much of APRA’s 21 years, APRA, and the arcane arts of prudential supervision, attracted limited interest from the media. To borrow one of my favourite quotes by a journalist who excels in making the complex simple, Ross Gittins:
"Taking an interest in prudential supervision is like watching paint dry. The only audience it gets is the people who take ten minutes to realise that they’re in the wrong room."1
Today, the story is different. APRA is regularly front page news. Why is there now such intense interest in a subject previously seen to be as interesting as drying paint?
In my view, it’s largely because as regulation has got stronger and cast its net wider, determining the right policy settings has become more contentious. When regulatory requirements are highly technical, fairly narrow and relatively modest, they are easily accommodated with competing priorities. As APRA’s prudential requirements have become both tougher and broader – traversing not just the tradition domain of solvency and other financial measures, but also dealing with issues of macro-stability, governance, culture, and remuneration – we have moved into much more contested territory. What are the right lending standards, and how do we balance safety with access to finance? What does an effective Board look like? What is the right measure of superannuation fund performance? How should a CEO be paid? There’s no shortage of strong views on these issues.
In such a contested environment, the business media’s role in airing the debate on these sorts of issues is essential. The complexity of much of what occurs in the financial world means many people rely on journalists to attend the announcements, analyse the documents, conduct the interviews, seek out alternate views, then tell their audience what has happened and what it means.
Journalists’ willingness to use their platforms to highlight poor conduct, scrutinise the powerful (including regulators) and speak up for the voiceless has also delivered important benefits for the community. Without the skill and tenacity of the media, for example, we are unlikely to have had a Royal Commission, nor the much-needed reforms it has set in motion.
The financial sector plays a critical role in preserving and building the economic prosperity of Australia. But, as I’ve noted on another occasion, the sector operates in a privileged position, providing products and services that are effectively mandatory to consume, difficult to understand, and of great importance to the financial well-being of individuals.2 The complicated nature of financial issues, and the extent they can impact on the well-being of individuals and families, means our business media is akin to a community service for many people.
As the public’s primary source of information on many complex but important economic and financial matters, business journalists therefore have a critical obligation to present audiences with information that is not just accurate, but also helps them with context and perspective. That’s especially the case with the financial sector, which is heavily reliant on trust and confidence to operate safely and effectively.
That trust and confidence has been badly eroded, and has no doubt led many Australians to believe financial institutions are greedy, focused on short-term profits to the exclusion of all else. Financial institutions, and their regulators, need to do better to root out and prevent bad behaviour. However, that’s not the full story of an industry that we all need to be successful given it underpins our economic prosperity, and which most Australians use successfully to buy homes, start businesses, recover financially from loss and save for retirement. The perception that customers seldom get fair treatment or positive outcomes when accessing these essential financial services is not just bad for the institutions – it can be harmful to the interests of the community itself if people become wary of taking advantage of products and services on offer for fear of poor treatment.
Getting that balance right is difficult. Bad behaviour should be called out and condemned. Equally, we want a dynamic and innovative financial system that delivers sustained prosperity for the community. The active debate already underway about the right policy settings for the financial sector in a post-Royal Commission world – remuneration and commissions, director responsibility, executive accountability, responsible lending, the role of caveat emptor, regulatory burden, the need for more competition – shows how difficult and contested this can be. Helping find the right balance will be aided by a full airing of the issues, and allowing all sides of the debate to be heard. You play an essential role in making sure that happens.
That is another area where APRA needs to find the right balance. The nature of what we do means a degree of discretion will always be necessary on our part. There are legal restrictions on what we can say publicly about the institutions we supervise, while disclosing other information could undermine an entity’s financial soundness. I often use the example of a list of cyber vulnerabilities in financial institutions; I am sure everyone would be interested in us publishing such a list, but the people most keenly interested would be the very people who you would least want to know!
Nevertheless, we at APRA have made it one of our strategic priorities to communicate more and more frequently to improve the understanding of what we do and why we do it. We are well beyond the ‘drying paint’ days: as our impact has grown, so has the obligation to explain ourselves better. We’re making a conscious effort to communicate more often, and in clearer, simpler and more accessible language. We are doing more speaking engagements and media briefings, and utilising webinars and other means to reach our desired audience. We’re developing a new section of our website aimed specifically at better explaining to the general public our mandate and what we do.
Whatever we do, however, the business media will still be essential to distribute and translate our messages, and explain and provide commentary on our activities. We look forward to your ongoing engagement with that.
Having an active media that explores the issues, scrutinises the evidence, tests the strength of arguments, searches out alternatives, and provides the community with a range of perspectives and viewpoints that give context and balance to significant issues of the day is critically important. Acknowledging the best of that through awards for excellence, such as those being celebrated today, is essential for reinforcing the central role that the business media plays in communicating, informing and educating the wider Australian community.
1. Gittins, Ross (1990), “Was the Reserve Awake While the Rest of us were Asleep?”, Sydney Morning Herald, 25 August 1990.
2. See “Good banking, by good bankers”, speech to the FINSIA Summit 2018.