Financial Services is a business built on trust: we serve clients’ interests; we protect clients’ data; and we profit when customers prosper. Yet sometimes firms prosper when their clients do not, and interests of firms and their clients are not always aligned. The spate of conduct risk issues, from payment protection insurance to LIBOR/foreign exchange (FX) fixing to financial advice have rightly shocked many and have resulted in staggering fines to the industry. Between 2008 and 2012, the cost of conduct for the 10 most affected global banks was estimated to be approximately US$ 250 billion. All of this has led to deep questioning of how firms go about serving their clients’ interests.
This paper suggests ways in which banks, insurers, and wealth managers in the Asia-Pacific region can approach conduct risk. We define conduct risk and its scope, look at the types of misconduct that have surfaced in the Asia-Pacific region and discuss potential future trends in the Asia-Pacific regulatory landscape. We conclude by outlining five elements that are essential to ensuring a comprehensive conduct risk management strategy.
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