tag:theconversation.com,2011:/au/topics/bear-41961/articlesbear – The Conversation2018-06-27T19:56:53Ztag:theconversation.com,2011:article/989392018-06-27T19:56:53Z2018-06-27T19:56:53ZThe government’s bank reforms wouldn’t have saved us a royal commission<figure><img src="https://images.theconversation.com/files/225070/original/file-20180627-112644-1tegf1v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">APRA chairman Wayne Byres addresses parliament. </span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>In a bid to fend off the Financial Services Royal Commission, the government introduced the <a href="https://www.legislation.gov.au/Details/C2018A00005">Banking Executives Accountability and Related Measures Act</a> (BEAR) last October. This legislation comes into effect next week. </p>
<p>But it is questionable whether it would have prevented many of the excesses and scandals that the royal commission has unearthed. In choosing not to impose restrictions on variable remuneration (bonuses, commissions etc.), BEAR effectively left untouched the incentives for inappropriate financial advice and lending decisions.</p>
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Read more:
<a href="https://theconversation.com/why-the-new-banking-laws-wont-be-the-slam-dunk-the-government-is-expecting-85530">Why the new banking laws won’t be the slam dunk the government is expecting</a>
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<p>BEAR is <a href="https://www.legislation.gov.au/Details/C2017B00229/Explanatory%20Memorandum/Text">explicitly intended</a> “to improve the operating culture of [Authorised Deposit-Taking Institutions] and increase transparency and accountability across the banking sector”. To do this, the act imposes a range of obligations on ADIs (our banks, building societies and credit unions) and their subsidiaries.</p>
<p>There is a requirement to conduct business “with honesty and integrity, and with due skill, care and diligence”. There is also a requirement to cooperate with the regulator. This includes identifying the specific accountability of senior executives. </p>
<p>Perhaps the most interesting obligations under BEAR are those pertaining to remuneration. These mandate a minimum deferral of 40% of variable pay for four years and clawback provisions in cases of bad behaviour. In other words, executives can lose their bonuses for poor behaviour even years after the fact. </p>
<p>The BEAR Act represents the first major step towards regulation of executive remuneration in Australia. </p>
<p>Other countries, particularly the UK and in Europe, have substantially more expansive regulatory regimes. There are no rules in Australia capping bonuses as a ratio of salary (as there are in the Netherlands, UK and Germany, based on EU rules). </p>
<h2>Does remuneration regulation work?</h2>
<p>BEAR adds momentum to a growing current of banker surveillance, and its symbolic and rhetoric value should not be dismissed. However, there is little empirical evidence to suggest these rules will impact behaviours. </p>
<p>Research into white-collar crime suggests that in many cases offenders pay limited regard to potential sanctions in decision-making, let alone malus or clawback provisions for poor performance (which are nothing new for bankers). Short-term outcomes and incentives tend to be more salient than long-term risks, particularly in an environment not characterised by strong enforcement. </p>
<p>Moreover, by opting not to impose a cap on variable pay, BEAR is unlikely to impact misconduct fuelled by a heavy use of bonuses to reward financial outcomes. </p>
<p>Examples of this misconduct include the CBA <a href="https://www.smh.com.au/business/banking-and-finance/dollarmites-bites-the-scandal-behind-the-commonwealth-bank-s-junior-savings-program-20180517-p4zfyr.html">Dollarmites scandal</a>, inappropriate fee structures at <a href="https://www.smh.com.au/business/banking-and-finance/banking-royal-commission-turns-its-gaze-to-dodgy-planners-fees-20180413-p4z9jh.html">AMP</a> and even the <a href="https://www.afr.com/business/banking-and-finance/financial-services/hayne-royal-commission-nab-staff-took-cash-bribes-to-smash-targets-20180312-h0xdfx">payment of bribes at NAB</a>. </p>
<p><a href="https://theconversation.com/theres-no-evidence-behind-the-strategies-banks-are-using-to-police-behaviour-and-pay-91064">Research shows</a> that variable pay incentives are instrumental in the creation of a sales culture at the banks that privileges financial profits over customer welfare.</p>
<p>Deferral of these incentives, without acting on the scale and ratio of incentives to base salary, is unlikely to have a substantial impact. </p>
<p>More is required to ensure that remuneration policies actually address behaviours. A more fundamental question must also be considered: in light of the culture of misconduct exposed by the royal commission, is it even possible to regulate culture?</p><img src="https://counter.theconversation.com/content/98939/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In choosing not to impose restrictions on bonuses and commissions, the government left untouched the incentives for inappropriate financial advice and lending decisions.Clinton Free, Professor, UNSW SydneyHannah Harris, Lecturer, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/865182017-11-08T02:32:24Z2017-11-08T02:32:24ZIt’s time for a royal commission into banking regulation<p>The handling of recent financial scandals show that regulators are confused about what they do, or <a href="https://theconversation.com/why-the-new-banking-laws-wont-be-the-slam-dunk-the-government-is-expecting-85530">should do</a>. And as a result the regulation of the financial system, which is vital to a strong functioning economy, is just not working effectively. </p>
<p>We can see the problem in the recent <a href="http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22committees%2Fcommrep%2F61c9ed97-7db3-4a67-a14e-a5114c0258b8%2F0000%22">testimony to the House Economics Committee</a>. Recounting the sequence of events that led the Commonwealth Bank to inform regulators of the <a href="http://www.austrac.gov.au/media/media-releases/austrac-seeks-civil-penalty-orders-against-cba">alleged breaches of money-laundering legislation</a>, CBA Chair Catherine Livingstone said:</p>
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<p>We were having board meetings at the time I was being called to Canberra by the Treasurer. When the board meeting, which went over multiple days, finished, which was lunchtime on the Wednesday, I immediately phoned the other two regulators, ASIC and APRA.</p>
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<p>This raises a raft of questions. Having known about the allegations of money laundering since 2015, why did CBA not inform the regulators until August 2017? Why did the treasurer warn CBA before CBA talked to the two regulators? When did the Treasurer first hear of the money-laundering breaches? And why did the treasurer not instruct AUSTRAC (an agency of the <a href="https://www.ag.gov.au/CrimeAndCorruption/AntiLaunderingCounterTerrorismFinancing/Pages/AUSTRAC.aspx">Attorney General’s department</a>) to inform <a href="http://asic.gov.au/about-asic/what-we-do/our-role/statements-of-expectations-and-intent/statement-of-expectations-april-2014/">ASIC</a> and <a href="http://www.apra.gov.au/AboutAPRA/Documents/140417-SOE-APRA-Statement-of-Expectations.pdf">APRA</a>? </p>
<p>In a previous parliamentary hearing, Greg Medcraft, Chairman of ASIC, had <a href="http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22committees%2Fcommrep%2F61c9ed97-7db3-4a67-a14e-a5114c0258b8%2F0000%22">said</a>:</p>
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<p>I met two days before with the chairman of the Commonwealth Bank, the chair of risk and the chair of the audit committee… There was no mention of what happened. Then I saw the announcement and, about a week later, the chair called me in to apologise. Timeliness and transparency are big issues in this one</p>
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<p>So, either ASIC and/or APRA were aware of the allegations of money laundering at CBA and took no action <a href="http://www.abc.net.au/news/2017-08-28/commonwealth-bank-to-face-independent-inquiry-apra/8848004">until prompted</a> by the treasurer, or the communications between the various agencies of government are not working as planned. Either way, this is no way to regulate a modern financial system.</p>
<h2>Even more regulatory confusion</h2>
<p>Just as he is due to <a href="http://www.abc.net.au/news/2017-10-17/asic-james-shipton-to-replace-greg-medcraft/9057190">leave his role as head of ASIC</a>, Greg Medcraft managed to end two high profile cases with modest wins. </p>
<p>Both <a href="http://www.afr.com/business/banking-and-finance/why-anz-and-nab-settled-asics-bbsw-case-20171026-gz9d90">ANZ Bank</a> and <a href="http://www.smh.com.au/business/banking-and-finance/nab-admits-staff-wrongdoing-as-it-settles-bbsw-20171027-gz9zva.html">NAB</a> have settled with ASIC for their parts in <a href="https://theconversation.com/years-on-asic-still-grappling-with-swap-rate-fixing-scandal-35851">manipulating the BBSW intereset rate benchmark</a>. Although the settlement remains to be approved by the Federal Court. </p>
<p><a href="http://www.abc.net.au/news/2017-10-25/rate-rigging-trial-adjourned-anz-nab-finalise-settlement/9083894">Westpac</a> remains the hold out, and the <a href="http://www.smh.com.au/business/banking-and-finance/westpac-traders-talked-openly-about-rigging-interest-rate-asic-alleges-20171030-gzbgx6.html">prosecution’s case has opened</a> in the Federal Court.</p>
<p>But in the euphoria at ASIC, a niggling question remains – what about the Commonwealth Bank?</p>
<p>For some time, Medcraft has <a href="http://www.theaustralian.com.au/business/opinion/john-durie/asic-and-cba-hold-their-ground-on-bank-bill-swap-rate-case/news-story/9b50dc7f7628ac630ac37c11e0e2ce33">warned</a> that action against CBA had not been ruled out and that <a href="http://www.smh.com.au/business/banking-and-finance/cba-braced-for-fourth-rate-rigging-case-20160608-gpecc4.html">information was being gathered</a>. Recently Medcraft confirmed that the regulator had “plenty of time” to <a href="http://www.financialservicescareer.com.au/news/regulator-circling-cba">take action against CBA</a>.</p>
<p>This also raises a number of questions. Not least why ASIC has not filed claims against CBA or announced that there would be no action taken against the bank. If CBA has no case to answer then ASIC should come out and exonerate the bank and relieve its long-suffering shareholders. </p>
<p>But if CBA has even a minor case to answer, and the regulator has held off hoping that the bank would settle without going to court, then ASIC may have been much too clever for their own good.</p>
<p>As a result of a <a href="http://www.abc.net.au/news/2017-08-23/commonwealth-bank-faces-shareholder-class-action/8833860">shareholder action</a> following the alleged money-laundering scandal, ASIC is <a href="http://www.abc.net.au/news/2017-08-11/asic-to-investigate-cba/8796542">now looking at</a> whether the CBA board “complied with continuous disclosure laws when it decided not to alert investors to the suspicious behaviour”.</p>
<p>This leaves ASIC in an extremely difficult position - looking at a possible failure to disclose the money-laundering scandal at CBA, while at the same time hinting that CBA may have done the same thing with BBSW.</p>
<p>But ASIC is not the only regulator to be operating in the dark. The latest Banking Executive Accountability Regime (BEAR) legislation only adds to the <a href="https://theconversation.com/bankings-new-bear-is-a-teddy-bear-not-a-grizzly-85687">confusion</a> on how best to regulate financial services.</p>
<p>When questioned in recent <a href="http://parlinfo.aph.gov.au/parlInfo/download/committees/estimate/c419b06c-d059-4ecb-b033-6d08bd9b7c6d/toc_pdf/Economics%20Legislation%20Committee_2017_10_26_5679.pdf;fileType=application%2Fpdf#search=%22rowell%22">Senate Estimates</a> about the regulatory impact statements that have been done for <a href="https://www.legislation.gov.au/Details/C2017B00229/Explanatory%20Memorandum/Text">new BEAR legislation</a>, Helen Rowell, deputy Chair of APRA, replied that she personally had “not seen them; I couldn’t say whether anyone else within APRA has seen them”. </p>
<p>This is despite the fact that APRA has been given an extra A$40 million over four year to handle the new legislation - for what, and where did this figure come from? </p>
<p>Again, this is no way to regulate a banking system. The confusion around what regulators do and how they do it, must be sorted out. </p>
<h2>Where next?</h2>
<p>The most obvious answer to clearing up this mess is to initiate a royal commission that looks specifically at banking regulation. In particular, what form a modern banking regulation system should take; which regulators should do what; what the responsibilities of parliament, ministers and regulators should be; and how regulators should share information and tackle common problems (such as <a href="https://theconversation.com/why-bankers-so-often-fail-to-comply-with-policies-and-regulations-82159">banking culture</a>).</p>
<p>Such a royal commission should concentrate on clearing up issues of regulatory philosophy, structure, legal requirements and administration. Whether or not there is an <a href="http://www.abc.net.au/news/2017-10-30/coalition-mps-may-cross-floor-for-banking-royal-commission/9100838">all-purpose banking royal commission</a>, the failures in the current system have to be remedied.</p>
<p>Of course, the government has only got itself to blame for getting in this mess. </p>
<p>The government’s own <a href="http://fsi.gov.au/">Murray Inquiry into the Financial System</a> made a recommendation that could have helped. The inquiry recommended the establishment of a new <a href="https://theconversation.com/to-clean-up-the-financial-system-we-need-to-watch-the-watchers-38359">Financial Regulator Assessment Board</a> (FRAB), which would:</p>
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<p>advise government annually on how financial regulators have implemented their mandates. Provide clearer guidance to regulators in Statements of Expectation and increase the use of performance indicators for regulator performance.</p>
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<p>Sounds sensible? Not to the government, as it chose to accept all of the major recommendations of David Murray’s inquiry <a href="https://treasury.gov.au/publication/government-response-to-the-financial-system-inquiry/attachment-government-response-to-financial-system-inquiry-recommendations/">except for this one</a>. </p>
<p>And, instead of having one professional body that looks at the performance of regulators, there has been a nonstop procession of “independent” inquiries, by <a href="https://www.commbank.com.au/guidance/newsroom/comminsure-releases-deloitte-report-into-claims-handling-201702.html">banks themselves</a>, the <a href="https://www.bankers.asn.au/media/media-releases/media-release-2016/review-into-retail-banking-remuneration-begins">banking industry </a>and even <a href="http://www.apra.gov.au/MediaReleases/Pages/17_34.aspx">regulators</a>. No big picture, just a patchwork of unconnected recommendations. And undoubtedly <a href="http://www.heraldsun.com.au/business/bank-chiefs-deny-raterise-gouging-at-parliament-hearing/news-story/0cedbd4a36dc41a731780a8054ff8524">more to come</a>. </p>
<p>An opportunity missed.</p><img src="https://counter.theconversation.com/content/86518/count.gif" alt="The Conversation" width="1" height="1" />
Parliamentary hearings reveal a lot of confusion between government, regulators and industry around banking regulation. This needs to be fixed.Pat McConnell, Visiting Fellow, Macquarie University Applied Finance Centre, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/863122017-10-26T23:56:39Z2017-10-26T23:56:39ZFor bankers, acountability does not start at home<p>When the CEOs of the four major banks <a href="http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22committees%2Fcommrep%2F61c9ed97-7db3-4a67-a14e-a5114c0258b8%2F0000%22">fronted the House Economics Committee</a>, the common thread was that accountability does not lie with them. Even after a decade of scandals like <a href="https://theconversation.com/why-rigging-of-the-bank-bill-swap-rate-hurts-everyone-55826">interest rate rigging</a>, <a href="http://www.heraldsun.com.au/business/bank-chiefs-deny-raterise-gouging-at-parliament-hearing/news-story/0cedbd4a36dc41a731780a8054ff8524">gouging of interest-only mortgagees</a> and <a href="https://theconversation.com/allegations-against-the-cba-show-the-need-for-a-royal-commission-into-the-banks-82063">alleged money laundering</a>.</p>
<p>In August, AUSTRAC <a href="http://www.austrac.gov.au/media/media-releases/austrac-seeks-civil-penalty-orders-against-cba">filed a claim</a> against the Commonwealth Bank for some 52,000 infringements of money laundering laws, and ASIC finally got to hear about it. </p>
<p>The true hierarchy of power and the realities of regulators’ supposed independence were laid bare by Commonwealth Bank Chairwoman Catherine Livingstone when relating the sequence of events:</p>
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<p>We were having board meetings at the time I was being called to Canberra by the Treasurer. When the board meeting, which went over multiple days, finished, which was lunchtime on the Wednesday, I immediately phoned the other two regulators, ASIC and APRA</p>
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<p>Obviously, the Treasurer pulls the strings and banking regulators are last to know.</p>
<p>The whole charade illustrates why the Treasurer’s latest piece of regulatory fiddling around, the <a href="https://www.legislation.gov.au/Details/C2017B00229/Explanatory%20Memorandum/Text">Banking Executives Accountability Regime</a> (BEAR), is a <a href="https://theconversation.com/bankings-new-bear-is-a-teddy-bear-not-a-grizzly-85687">waste of time and money</a>.</p>
<h2>Where is the personal accountability?</h2>
<p>First and most obvious, none of the many issues addressed in the Committee’s hearings would fall under the new BEAR legislation because they do not threaten the prudential standing of the banks. </p>
<p>The issue of collective, as opposed to individual, accountability was brought into the open by Ms Livingstone in another exchange. </p>
<p>The CBA board’s remuneration committee had OK’d a performance bonus for the bank’s senior staff even though the money-laundering problems had been known for at least a year.
This decision was partially reversed after the AUSTRAC allegations came to light:</p>
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<p>The board took the view that there was collective accountability at the board and the senior executive level for the impact on the reputation of the bank of AUSTRAC pursuing civil proceedings. So in recognition of that collective accountability, we determined to reduce the bonuses to zero and to take the penalty on the directors’ fees.</p>
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<p>When pressed by a committee member about individual accountability for the scandal, Ms Livingstone gave the standard response:</p>
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<p>No, the issue, as I’ve said, is that we have to actually go through all the processes through our subcommittee to determine the facts and where the individual accountability lies.</p>
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<p>And when he, too, was pressed, Commonwealth Bank CEO Ian Narev fell back on the old “this is the subject of legal proceedings” response. No sign of anyone standing up and taking personal responsibility for any of the <a href="https://theconversation.com/where-the-accountability-problems-started-at-cba-83809">numerous scandals</a> that CBA has been involved in over the past decade. </p>
<p>Nor will they have to under the BEAR, because the bar has been set too high to hold any one individual to account. But lest it be thought that CBA was the only bank to run away from accountability. </p>
<p>In the session with the CEO of NAB, <a href="http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22committees%2Fcommrep%2F61c9ed97-7db3-4a67-a14e-a5114c0258b8%2F0000%22">Andrew Thorburn</a>, the committee opened the touchy issue of why no-one had taken the hit for the scandal where some 220,000 customers had to be reimbursed for “incorrectly charged fees for financial advice”. </p>
<p>When asked why the then head of the bank’s wealth unit had received an increased bonus and had been promoted, Thorburn countered that he thought that the manager concerned:</p>
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<p>does understand accountability. He’s been before a number of committees. He speaks to me a lot and speaks to our board a lot. I think he does understand it.</p>
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<p>So for NAB, accountability is attending meetings and talking to bosses. By that definition almost everyone in NAB is “accountable,” so no need to regulate?</p>
<p>Nor is NAB alone. In the <a href="http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22committees%2Fcommrep%2Faf124b58-f8c9-4d0f-81ef-23504fcea693%2F0002%22">first set of hearings</a>, Brian Hartzer, CEO of Westpac, was questioned about the <a href="https://www.westpac.com.au/about-westpac/media/media-releases/2017/15-march/">enforceable undertaking </a>(EU) signed with ASIC concerning the manipulation of foreign exchange benchmarks. He replied that “none of the traders involved are with us anymore”. </p>
<p>Fair enough, but what about the senior managers involved, do they still work for the bank?</p>
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<p>The most senior executives do, yes, but that is after looking very carefully at the steps that they took both before and after to deal with the issue. I can say — and I think ASIC will agree — that the response of our executives when this issue emerged has been exactly what you would want in terms of getting into the detail and making sure control issues were addressed.</p>
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<p>So actions, such as <a href="http://asic.gov.au/about-asic/media-centre/find-a-media-release/2017-releases/17-065mr-asic-accepts-enforceable-undertakings-from-westpac-and-anz-to-address-inadequacies-within-their-wholesale-fx-businesses/">colluding with competitors</a> to rig the <a href="https://theconversation.com/asic-finally-pulls-the-bbsw-trigger-on-anz-55766">BBSW rate</a> did not trigger any accountability issues, beyond the alleged perpetrators. This says everything about where Westpac considers accountability lies, i.e. with the person who gets caught?</p>
<p>And finally ANZ Bank, where CEO, Shayne Elliot, discussed the “hypothetical” that ANZ would settle the long-running BBSW case with ASIC. Not completely hypothetical as ANZ <a href="http://www.abc.net.au/news/2017-10-23/asic-settles-court-case-against-anz-bank/9076140">settled the case</a> a few days later, after what had been prolonged negotiations. </p>
<p>In the light of the ASIC settlement for a <a href="https://www.bloomberg.com/news/articles/2017-10-22/anz-bank-settles-rate-rigging-case-with-securities-regulator">reputed A$50 million</a>, Elliot’s response was illuminating as regards individual accountability. When asked, “are there any of those potential bonuses affected that now won’t be vesting because of things that you’ve uncovered in the course of dealing with this case?”:</p>
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<p>Not to my knowledge. We have a lot of people at the bank. There’s a list of equity and deferred comp that vest in people now-ish, and we’re going through the process of approving and making sure that those things should still take place. I’m not aware that any of those individuals [who had left the bank] are receiving any, but I might be wrong. I’d have to go back and check.</p>
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<p>Given the impending payment of some A$50 million of shareholder’s money, one would hope that going back and checking was not necessary, but the off-hand answer illustrates where ANZ considers accountability lies - that is, with the last person to leave the bank.</p>
<p>The common thread of the CEOs’ responses to questions of where does individual accountability lie is “not with us”. Even after considering the government’s new BEAR legislation, the concept of individual accountability for wrongdoing by employees appears to be completely alien to the senior leaders of these banks. </p>
<p>With such a lack of understanding, the BEAR legislation is doomed and should be put out of its misery.</p><img src="https://counter.theconversation.com/content/86312/count.gif" alt="The Conversation" width="1" height="1" />
New banking legislation hopes to hold executives accountable, but there weren’t good signs at the latest parliamentary committee meeting.Pat McConnell, Visiting Fellow, Macquarie University Applied Finance Centre, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/855302017-10-18T03:40:41Z2017-10-18T03:40:41ZWhy the new banking laws won’t be the slam dunk the government is expecting<figure><img src="https://images.theconversation.com/files/190738/original/file-20171018-32348-ozihlw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">APRA chair Wayne Byres says the regulator is unlikely to use its new enforcement powers. </span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>The federal government <a href="http://www.smh.com.au/business/banking-and-finance/bear-fears-why-the-banking-executive-accountability-regime-may-not-change-much-20171012-gz06zc.html">is set</a> to enact new laws covering Australian banks, senior executives and directors. Called the <a href="https://treasury.gov.au/consultation/c2017-t222462/">Banking Executive Accountability Regime</a> (BEAR), it imposes new legal obligations on banks and their senior management and empowers the banking regulator, the Australian Prudential Regulation Authority (APRA), to take action against banks and senior personnel who fail to comply with these obligations. </p>
<p>However, APRA does not consider itself to be a legal enforcement agency. APRA <a href="http://www.apra.gov.au/AboutAPRA/Publications/Documents/APRA-FS6-062015.pdf">prefers</a> to operate through consultation and co-operation with the organisations that it regulates, not enforcement action. </p>
<p>APRA’s chairman, Wayne Byres, has <a href="http://www.apra.gov.au/Speeches/Pages/Key-issues-for-the-year-ahead-Bank-Capital-and-the-approaching-BEAR.aspx">stated</a> that APRA does not intend to change the nature of its supervision as the banking regulator. If that remains the case, APRA is unlikely to make much use of its new powers. </p>
<p>So we shouldn’t expect a fresh wave of legal action against banks, senior executives and directors because of BEAR. However, there is some reason to hope that the legislation will gradually change the culture within banks, through new accountability obligations and their impact on banking executives and directors. </p>
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Read more:
<a href="https://theconversation.com/talk-of-reforming-toxic-banks-is-misguided-improve-the-product-and-culture-will-follow-57550">Talk of reforming toxic banks is misguided: improve the product and culture will follow</a>
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<p><a href="https://static.treasury.gov.au/uploads/sites/1/2017/08/c2017-t200667-BEAR_cp.pdf">BEAR</a> is a response to growing anger at poor culture and behaviour (including <a href="https://theconversation.com/allegations-against-the-cba-show-the-need-for-a-royal-commission-into-the-banks-82063">alleged money laundering</a> and <a href="https://theconversation.com/asic-finally-pulls-the-bbsw-trigger-on-anz-55766">interest rate rigging</a>).</p>
<p>The legislation follows a <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/Four_Major_Banks_Review/Report">federal parliamentary review</a> of the four major banks. It found that the banks had repeatedly failed to protect the interests of consumers and that senior executives had created this banking culture. The importance of having a culture that supported fair treatment of consumers was reinforced by the <a href="http://fsi.gov.au/publications/final-report/">earlier findings of the Financial Systems Inquiry</a>. </p>
<p>BEAR seeks to address these concerns by <a href="https://treasury.gov.au/consultation/c2017-t222462/">imposing new accountability obligations</a> on banks, their senior and most influential executives and directors. The new law obliges them to: act with honesty and integrity, due skill, care and diligence; to co-operate with APRA; and to take reasonable steps to prevent matters that adversely affect the “prudential standing” of banks. </p>
<p>Prudential standing in essence <a href="http://www.apra.gov.au/AboutAPRA/Publications/Pages/MAP-AUS-FSF.aspx">refers</a> to the financial stability of banks. The laws greatly increase the standards of behaviour required of senior bank executives. These go beyond the existing standards under APRA’s so-called <a href="http://apra.gov.au/adi/PrudentialFramework/Pages/prudential-standards-and-guidance-notes-for-adis.aspx">prudential framework</a>. </p>
<h2>The impact on culture</h2>
<p>Critical to the success of BEAR is APRA’s increased powers to disqualify senior executives and/or directors from being able to act in their positions and to sue banks for civil penalties up to A$200 million. </p>
<p>Since APRA is not willing to use its new enforcement powers except in rare cases, you might wonder how these laws will lead to cultural change. Wayne Byers <a href="http://www.apra.gov.au/Speeches/Pages/Key-issues-for-the-year-ahead-Bank-Capital-and-the-approaching-BEAR.aspx">has stated</a> that “the goal must be that, with clear boundaries and obligations set out … boards and executives conduct their affairs in such a manner that intervention by APRA is not needed”.</p>
<p>In singling out the senior executives and directors of banks and imposing new legal duties on them, the BEAR adopts a “top-down” or hierarchical approach to managing bank behaviour. Boards and executives will be expected to conduct their bank’s affairs in a manner that meets the standards implied by their new accountability obligations and to account for poor outcomes. </p>
<p>Given the size of banks, this will require senior management to establish systems for monitoring the conduct of personnel at lower levels of the organisation. While top-down approaches are a <a href="http://apra.gov.au/Speeches/Documents/02-The-Australian-Banking-System-under-Stress-9-June-2010.pdf">common feature</a> of APRA’s risk-management strategies and policies, the heightened accountability of banking executives and directors under BEAR is the first of its kind.</p>
<p>Through the process of co-operation APRA will be able to encourage and cajole banks and their senior personnel to adopt higher standards of behaviour, which in turn will gradually lift standards across the organisation. The experience of the UK, where a <a href="https://www.fca.org.uk/news/speeches/expanding-scope-individual-accountability-corporate-misconduct">similar set of laws</a> is already in place, points to the likelihood of its success.</p><img src="https://counter.theconversation.com/content/85530/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Helen Bird does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>While the government hopes its new regulation will rein in the banks, it’s unlikely to do so.Helen Bird, Course Director, Master of Corporate Governance & Research Fellow, Swinburne Law School, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/856872017-10-18T03:29:31Z2017-10-18T03:29:31ZBanking’s new BEAR is a teddy bear not a grizzly<p>The government’s new <a href="https://treasury.gov.au/consultation/c2017-t222462/">Banking Executive Accountability Regime</a> (BEAR) legislation is a confused mess that is not going to do what it claims to do, which is make bankers accountable for <a href="https://www.michaelwest.com.au/do-not-stuff-up-this-institution-narev-told-the-inside-story-of-australias-biggest-money-laundering-scandal/">scandals</a>.</p>
<p>Rather than being a terrifying polar or grizzly, it is already an old teddy bear that has had the stuffing knocked out of it.</p>
<p>Earlier this year when announcing the budget, the <a href="http://sjm.ministers.treasury.gov.au/media-release/044-2017/">Treasurer</a> was out in front, leading the mob to the very gates of the big banks, <a href="http://www.afr.com/news/policy/budget/budget-2017-aicd-slams-unprecedented-scrutiny-of-bank-execs-20170510-gw1khu">threatening</a> to take bank executives out and (at least figuratively) roast them.</p>
<blockquote>
<p>“These measures will mean executives will be more accountable, will be subject to greater scrutiny and there will be increased consequences for when executives and banks do not meet expectations.”</p>
</blockquote>
<p>Unfortunately, in reality the legislation is a damp squib.</p>
<h2>Why is the legislation confused?</h2>
<p>The <a href="http://www.afr.com/business/banking-and-finance/financial-services/banks-growl-as-confusion-unleashed-by-bear-20170801-gxmuyi">confusion</a> stems from the regulatory body chosen to implement this new legislation. The government has chosen the Australian Prudential Regulation Authority (APRA) to run the new regime. But in doing so, it has confused the roles of APRA and the Australian Securities and Investment Commission (ASIC), the “Twin Peaks” of our regulatory system.</p>
<p>Having two peaks allows each regulator to concentrate on its particular areas of expertise. </p>
<p>In Australia, APRA, the “prudential” regulator, is responsible for ensuring that banks do not do anything that threatens the integrity of the banking system (like lending too much money to the wrong people). ASIC is the “conduct” regulator, responsible for ensuring that financial institutions act fairly (such as not selling dodgy products to customers).</p>
<p>While the two agencies are created with equal power and insulated from each other, Dr. Schmulow of the University of Western Australia <a href="http://clsbluesky.law.columbia.edu/2016/03/31/doing-it-the-australian-way-twin-peaks-and-the-pitfalls-in-between-2/">notes</a> there is a natural tendency for governments to favour the regulator charged with avoiding financial crises (APRA). This is for reasons that are easy to understand - system-wide financial crises cause the worst sort of harm to governments, they lose power. </p>
<p>The Australian regime mirrors that in the UK where the Prudential Regulation Authority (PRA) is, as the name suggests, the prudential regulator, and the Financial Conduct Authority (FCA) is the conduct peak.</p>
<p>In the United Kingdom, the FCA runs their equivalent of BEAR, the <a href="https://www.fca.org.uk/firms/senior-managers-certification-regime/banking">Senior Managers and Certification Regime</a>. This makes eminent sense given the FCA’s remit is to regulate conduct.</p>
<h2>Why has APRA been chosen?</h2>
<p>So why has the government chosen APRA to operate the BEAR? The reason given in a <a href="https://static.treasury.gov.au/uploads/sites/1/2017/08/c2017-t200667-BEAR_cp.pdf">consultation paper</a>, is that APRA already operates what is called a “Fit and Proper” regime, to ensure that senior managers are in fact up to the job of managing a financial institution.</p>
<p>This is true but only half so. </p>
<p>APRA’s <a href="http://www.apra.gov.au/CrossIndustry/Documents/Prudential%20Standard%20CPS%20520%20Fit%20and%20proper.pdf">Fit and Proper standard</a> does nothing other than require banks to have a fit and proper policy, which should contain certain clauses. But APRA does not enforce this. In fact, this standard is one of the last vestiges of the old industry “self-regulation” regime that failed miserably in the run up to the global financial crisis (GFC).</p>
<p>This also fails to take into account that ASIC also has a <a href="http://asic.gov.au/regulatory-resources/find-a-document/regulatory-guides/rg-204-applying-for-and-varying-a-credit-licence/fit-and-proper-people/">Fit and Proper</a> regime, and one that they take an <a href="http://asic.gov.au/about-asic/media-centre/find-a-media-release/2017-releases/17-178mr-asic-bans-former-westpac-adviser-for-five-years/">active role in enforcing</a>.</p>
<p>And in a classic case of left and right hands not knowing what the others are doing, there is currently a Treasury taskforce <a href="http://kmo.ministers.treasury.gov.au/media-release/088-2017/">working</a> on how to expand ASIC’s powers in this very area. </p>
<p>At one level, it does not really matter which regulator does what, provided that money and resources are given to the regulator to do its job. However, in choosing APRA, Treasury has adjusted the legislation to suit APRA’s existing role and capabilities and as a result has seriously compromised the very objectives of the legislation. </p>
<p>For instance, the <a href="https://static.treasury.gov.au/uploads/sites/1/2017/08/c2017-t200667-BEAR_cp.pdf">legislation will apply only</a> “where there is poor conduct or behaviour that is of a systemic and prudential nature”. </p>
<p>In other words, the regime will apply if, and only if, poor conduct creates risks that threaten the stability of a bank and, by extension, of the entire banking system. That is an extraordinarily high bar to clear.</p>
<p>This also means, for instance, that BEAR cannot be used to go after conduct that harms customers. For instance, <a href="http://www.apra.gov.au/CrossIndustry/Documents/Prudential%20Standard%20CPS%20520%20Fit%20and%20proper.pdf">unjustly withholding insurance claims</a>, does not jeopardise the viability of institutions involved let alone the entire banking system. Such misconduct is effectively now removed from the BEAR’s mandate.</p>
<p>To create any systemic prudential risk, a bank has to do something pretty horrendous over a long period of time, such as <a href="http://www.abc.net.au/news/2017-10-04/consumers-unaware-they-have-interest-only-home-loans/9014448">lending too much money to housing investors for years</a>. </p>
<p>It is conceivable that an individual banker might, working alone, do something that jeopardises the profitability of a bank. But it is inconceivable that working alone, a single person (even a number of people in a business unit) could jeopardise an entire institution, given the checks and balances in most banks. </p>
<p>Banks, such as the <a href="https://croakingcassandra.com/2016/08/15/tricontinental-revisiting-the-financial-disasters-of-the-1980s/">State Bank of Victoria</a>, have failed in Australia. But this was not the fault of one individual. Rather it was a failure of corporate governance by directors and an abrogation of responsibilities on the part of senior managers and also regulators. </p>
<h2>APRA is already overburdened</h2>
<p>With the IMF recently identifying <a href="http://www.abc.net.au/news/2017-10-04/imf-warns-australia-on-household-debt/9013634">serious prudential problems</a> in Australian banks, and the RBA <a href="http://www.abc.net.au/news/2017-10-13/rba-financial-stability-review/9046538">concerned</a> over <a href="https://theconversation.com/vital-signs-the-spooky-mortgage-risk-signs-our-bankers-are-ignoring-85591">rising levels of household debt</a>, APRA already has its hands full.</p>
<p>In fact, when he last fronted a Parliamentary Committee, Westpac CEO Brian Hartzer <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/FourMajorBanksReview3/Public_Hearings">admitted</a> that some 50% of the bank’s mortgages were “interest-only”. This is after <a href="http://www.abc.net.au/news/2017-03-31/apra-clamps-down-on-interest-only-mortgage-loans/8403712">APRA recently ordered</a> banks to reduce their exposures to such loans to 30%. </p>
<p>If CEOs don’t pay attention to APRA on serious stuff such as <a href="https://theconversation.com/vital-signs-the-spooky-mortgage-risk-signs-our-bankers-are-ignoring-85591">interest-only lending</a>, what chance on softer conduct problems?</p>
<h2>Are the banks worried by the BEAR?</h2>
<p>In his evidence to parliament, Mr Hartzer appears to have let the cat out of the bag as regards bankers’ perceptions of the BEAR:</p>
<blockquote>
<p>“BEAR imposes severe penalties when things go wrong and we are keen to work with the government and regulators to avoid unintended consequences.”</p>
</blockquote>
<p>Mr Hartzer added that, despite the fact that the draft legislation has only just been introduced to parliament, and without bipartisan support, Westpac was already implementing BEAR. </p>
<p>This is either remarkable foresight or the banks think the BEAR will be a pussy cat. A bit of tweaking here, a bit of box ticking there and nothing bad will happen.</p>
<p>APRA has form here. For 19 years APRA has had the <a href="http://www.theage.com.au/business/banking-and-finance/fancy-dress-financial-regulators-asic-and-apra-must-go-20160531-gp89dp.html">power to remove directors</a> under the Banking Act and it could cite its own <a href="http://www.apra.gov.au/CrossIndustry/Documents/Prudential%20Standard%20CPS%20510%20Governance.pdf">standard on corporate governance</a> when exercising that power. But the number of times in 19 years APRA has exercised the power? Zero!</p>
<p>Having two (very confused) regulators, competing with one another, will ultimately mean that neither has the skills, capabilities nor the time to properly regulate banks. This will be extremely dangerous in a crisis.</p>
<p>And with the appointment of a regulation and corporate culture expert as the new <a href="http://www.sbs.com.au/news/article/2017/10/17/labor-gives-new-asic-chief-thumbs">Chairman of ASIC</a>, it makes even more sense to retain the existing Twin Peaks model and to allow ASIC to tame the BEAR.</p><img src="https://counter.theconversation.com/content/85687/count.gif" alt="The Conversation" width="1" height="1" />
The new banking regulations undermine the existing system, confusing regulators and achieving very little.Pat McConnell, Visiting Fellow, Macquarie University Applied Finance Centre, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/818682017-08-17T06:25:46Z2017-08-17T06:25:46ZHow to live with bears<figure><img src="https://images.theconversation.com/files/182204/original/file-20170816-32606-k6tm1z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The return of European brown bears to the Alps means that humans must learn about cohabitation.</span> <span class="attribution"><a class="source" href="https://pixabay.com/fr/europ%C3%A9enne-de-l-ours-brun-l-eau-2186748/">Alexas Fotos/Pixabay</a></span></figcaption></figure><p>Bears have been on Europeans’ minds lately, as violent encounters with these powerful mammals make international headlines. </p>
<p>In late July, <a href="http://www.ibtimes.co.uk/hero-dog-saves-owner-bear-mauling-alps-1632052">an encounter in the Italian Alps between a female bear</a>, 14-year-old Kj2, a man and his dog ended with the man being hospitalised. A few weeks later, Kj2 was killed upon order of the provincial administration. Around the same time, in the French Pyrenees, <a href="https://www.theguardian.com/world/2017/jul/23/bear-chases-200-sheep-over-cliff-edge-france-spain">a bear startled a flock of sheep</a> and drove them to their death at the bottom of a cliff. </p>
<p>The increasing number of confrontations with bears is not coincidental. <a href="http://ec.europa.eu/environment/nature/conservation/species/carnivores/pdf/life_and_human_coexistence_with_large_carnivores.pdf">Like other large predators</a>, bears have been reintroduced all over Europe since at least the early 1990s, thanks <a href="http://ec.europa.eu/environment/life/publications/lifepublications/lifefocus/documents/reintroduction.pdf">to European Union-funded wildlife programmes</a>.</p>
<p>Local communities, politicians, and some in the media have started to use these incidents to push for not just the removal of the culprits but for an overhaul of these decades-old programmes. There are calls to allow people to once again hunt bears, though these remain <a href="http://www.banc.org.uk/wp-content/uploads/2015/03/ECOS-35-1-44-What-future-for-Bears-in-Western-Europe.pdf">a critically endangered species in western Europe</a>.</p>
<p>As I explain in a recent essay on the conservation of bears of the Italian Alps, published in a book I co-edited, <a href="https://www.routledge.com/The-Nature-State-Rethinking-the-History-of-Conservation/Hardenberg-Kelly-Leal-Wakild/p/book/9781138719040">The Nature State. Rethinking the History of Conservation</a> (Routledge, 2017), the issue here is biosecurity. The state must be able to guarantee local communities personal and economic safety while also defending the right of iconic species to roam areas that were once their historical ranges. </p>
<p>This is proving a tricky balance.</p>
<h2>To hunt or to preserve?</h2>
<p>Until the early twentieth century, governments in both Austria and Italy sided with local communities, awarding <a href="https://orso.provincia.tn.it/content/download/12826/229854/version/1/file/tesi_MariaCalabrese.pdf">monetary prizes for every bear killed in a hunt</a>. In this system, all the risks of cohabitation were essentially borne by the bears. </p>
<p>Over the last century, as Alpine landscapes have undergone radical changes, the areas available to bears shrank markedly. The combination of habitat change with a state policy aimed at species extermination proved very effective in reducing the presence of bears in the Alps. <a href="http://www.jstor.org/stable/3872571">By the end of the 1930s</a>, most Alpine bear colonies had gone extinct. Small populations in Slovenia and northeastern Italy were the only exceptions. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/182203/original/file-20170816-32682-12e1m3f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/182203/original/file-20170816-32682-12e1m3f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=364&fit=crop&dpr=1 600w, https://images.theconversation.com/files/182203/original/file-20170816-32682-12e1m3f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=364&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/182203/original/file-20170816-32682-12e1m3f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=364&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/182203/original/file-20170816-32682-12e1m3f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=457&fit=crop&dpr=1 754w, https://images.theconversation.com/files/182203/original/file-20170816-32682-12e1m3f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=457&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/182203/original/file-20170816-32682-12e1m3f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=457&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Bear hunting throughout Europe led to the species’ eradication in many areas.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Hirschvogel_Bear_Hunt.jpg">Wikimedia</a></span>
</figcaption>
</figure>
<p>As the conservation movement gained steam in the mid-twentieth century, there were attempts to preserve the remaining species, particularly in Italy. The Fascist regime declared a <a href="http://www.edizionieuropee.it/LAW/HTML/3/zn16_01_007.html">total ban on hunting in 1939</a>, and various plans were laid to create a nature reserve in the Alps of Trentino, in northen Italy. </p>
<p>In parallel, a complex system of monetary compensations granted herders at least some indemnification for possible bear attacks on sheep and cattle. In doing so, the state took over some of the risks of human cohabitation with bears.</p>
<p>But efforts to preserve the colony in Trentino proved useless: by the end of the 1980s, the residual population was deemed <a href="https://www.jstor.org/stable/3872993">too small to guarantee reproduction</a>. Instead, bears from Slovenia were introduced there to ensure the continuity of bears in the mountains of Trentino. </p>
<p>Such reintroduction programmes caused local communities to lose trust in the state, perceiving it as taking sides in favour of conservationism and the bears.</p>
<h2>Bears and xenophobia</h2>
<p>Attacks like the one in late July and a 2014 <a href="http://www.environmentandsociety.org/arcadia/bears-are-back-life-ursus-translocation-project-trentino">incident, which led to the death of the bear Daniza</a>, have also seemed to awaken some politicians’ baser instincts. Following each violent ursine encounter – which, if frightening, are still infrequent – some have adopted nearly the same xenophobic discourse they employ criticising European migration policies. </p>
<p>The bears of Trentino are represented as foreign and dangerous, alien to the territory they inhabit. Citizens are called to assert control over “their homeland”, reclaiming it from the bears that politicians of opposing factions have helped to reintroduce and after centuries of wilful destruction. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/182286/original/file-20170816-10024-1hzalbo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/182286/original/file-20170816-10024-1hzalbo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=408&fit=crop&dpr=1 600w, https://images.theconversation.com/files/182286/original/file-20170816-10024-1hzalbo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=408&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/182286/original/file-20170816-10024-1hzalbo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=408&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/182286/original/file-20170816-10024-1hzalbo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=513&fit=crop&dpr=1 754w, https://images.theconversation.com/files/182286/original/file-20170816-10024-1hzalbo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=513&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/182286/original/file-20170816-10024-1hzalbo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=513&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">European brown bears reintroduced in the Alps are victims of xenophobic sentiments.</span>
<span class="attribution"><a class="source" href="https://cdn.pixabay.com/photo/2016/08/05/14/12/european-brown-bear-1572339_960_720.jpg">Pixabay</a></span>
</figcaption>
</figure>
<p>It may well be that the female Kj2, who was killed after putting a man in the hospital, was dangerous. Yet from some accounts, it seems Kj2 may have simply been acting in self-defence from a scared and stick-wielding human and his dog. </p>
<p>Either way, she could likely have just been relocated to a safer area, which would have appeased fearful locals and returned the debate about cohabitation with bears to a less confrontational level. </p>
<p><a href="https://www.thelocal.it/20170814/death-of-brown-bear-killed-in-northern-italy-enrages-activists">As numerous conservationists and animal rights activists have claimed</a>, shooting Kj2 for having exhibited the natural behaviour of a bear seems like a disproportionate response. Bear defenders have called for <a href="http://www.telegraph.co.uk/news/2017/08/14/tourists-boycott-dolomites-brown-bear-killed/">a tourist boycott of the region</a>. </p>
<h2>The importance of cohabitation</h2>
<p>Conflicts between humans and bears, or by proxy conflicts about bears between local communities and state authorities, aren’t recent history in Trentino. </p>
<p>Cohabitation has been the normal state of things in the Alps since well before reintroduction programmes began, and herders have been looking for ways to cope with the bear for over a century, adapting their strategies to changing state norms and legislation. Bear attacks are only most recent manifestation of an interspecies conflict about access and resources use that has always occurred in this rural region. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/182205/original/file-20170816-32682-1ililhl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/182205/original/file-20170816-32682-1ililhl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=518&fit=crop&dpr=1 600w, https://images.theconversation.com/files/182205/original/file-20170816-32682-1ililhl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=518&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/182205/original/file-20170816-32682-1ililhl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=518&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/182205/original/file-20170816-32682-1ililhl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=651&fit=crop&dpr=1 754w, https://images.theconversation.com/files/182205/original/file-20170816-32682-1ililhl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=651&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/182205/original/file-20170816-32682-1ililhl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=651&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Humans can live peacefully with real bears, too.</span>
<span class="attribution"><a class="source" href="https://pixabay.com/fr/enfant-personne-humain-fille-teddy-830725/">Pezibear/Pixaby</a></span>
</figcaption>
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<p>But, over the centuries, as populations of great predators greatly diminished in number, so, too, has our tolerance for risks. Decades of perceived security have made modern sheep herding, for example, unfit for proximity to bears.</p>
<p>There is no way to end conflicts and encounters, but it is possible to reduce their impact. Establishing clear rules on what humans are allowed to do and <a href="http://dinalpbear.eu/wp-content/uploads/2014/12/LEAFLET-How-to-behave-in-bear-areas-ENGLISH.pdf">how they are supposed to behave</a> in areas frequented by bears (and defining where these areas are located) would be a good start. Wielding sticks, approach cubs and letting dogs off-leash would definitely not be included in such guidelines.</p>
<p>The costs and risks of cohabitation need to be more fairly redistributed among all the actors, from tourists and herders to the municipality and provincial government and, yes, the bears, too. Because the Alps still deserve their bears, and the bears still deserve their Alps.</p><img src="https://counter.theconversation.com/content/81868/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Wilko Graf von Hardenberg received post-doctoral funding from the Autonomous Province of Trento. </span></em></p>Bear-man conflicts have made news in the Alps but history tells a story of a possible cohabitation.Wilko Graf von Hardenberg, Senior Research Scholar, Max Planck Institute for the History of ScienceLicensed as Creative Commons – attribution, no derivatives.