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Banking Reform ProgramInitial Benchmarking Report – Consumer Study

Trust is fundamental to the banking industry’s social licence to operate and engage with its customers and communities. Particularly in the aftermath of the global financial crisis, there has been a decline in the public’s trust of our key institutions – Government, business, media and non-government organisations – that needs to be rebuilt to ensure these institutions can continue to meet the standards and expectations of its customers and communities.

Looking at trust in the context of the Financial Services sector, Australians are more trusting than some international counterparts. Edelman’s Annual Trust Barometer*, a global study into trust that is now in its 17th year, indicates that Australians’ trust in the Financial Services sector has increased by two percentage points in the last 12 months, and is neutral compared to global rankings.

Comparing Australians’ trust in the Financial Services sector to other main institutions (Government, business, media and non-government organisations), we see that although trust in the Financial Services sector is neutral, it is higher than trust in three of four of the key institutions. This year’s results demonstrate a slight increase compared to last year.

Whilst this shows some progress, there is a need for institutions to continue building the trust of Australian consumers and communities.

The ABA Banking Reform Program

In April 2016, the Australian Bankers’ Association (ABA) launched the Banking Reform Program1 to make banking better for consumers across Australia. The Banking Reform Program was developed to protect consumer interests, increase transparency and accountability, and to build consumer trust and confidence in banks. In January 2017, the Better Banking campaign2 was launched with the banking industry making additional commitments to raise standards and make banking products, services and culture better for all Australians, through the adoption of the following initiatives:

• Reviewing product sales commissions and product based payments

• Making it easier for customers when things go wrong

• Reaffirming support for employees who ‘blow the whistle’ on inappropriate conduct

• Removing individuals from the industry for poor conduct

• Strengthening the commitment to customers in the Code of Banking Practice

• Supporting ASIC as a strong regulator

• Making account switching easier

• Providing better support for small businesses and farmers

• Supporting customers experiencing financial difficulties and establishing a new debt repayment service with financial counsellors.

The details of these initiatives are outlined in the appendix of this report.

Over the past 12 months, the banking industry has conducted independent reviews and stakeholder engagement, and invested in designing and setting the guiding principles to set the groundwork for these initiatives to deliver better customer outcomes and achieve the overall objectives of the Banking Reform Program3.

1 https://www.betterbanking.net.au/

2 http://www.bankers.asn.au/media/media-releases/media-release-2016/we-hear-you-banks-announce-more-changes-to-make-banking-better

3 For more information about the Better Banking campaign, go to www.betterbanking.net.au. For an update on the first year of the Banking Reform Program and the implementation of the initiatives, please read the annual report.

Key Findings1 Consumers are receptive to the Banking Reform Program, and there is positivity regarding the

benefits that the initiatives will bring. Approximately half of those surveyed believe the Banking Reform Program will improve trust, confidence and transparency across the Australian banking industry.

2 Consumers feel that all the Banking Reform Program initiatives are important. When asked to score the importance of each ‘making banking better’ initiative, consumers surveyed rated all initiatives important, with scores ranging between 62% and 75%. It is clear that consumers want to see the industry doing more – and feel that each initiative can make a difference, individually and collectively. What they need to see now is these initiatives being delivered, and to experience the benefits of the changes.

Why focus on trust?Trust is a strong and meaningful indicator of how consumers feel towards an industry, company or institution. It is a complex measure, including satisfaction, but also encompassing perception, vicarious views of others’ experiences, ethical conduct and moral measures. Therefore, trust as an indicator provides additional insights. However, there are many additional factors at play, each of which will influence the overall measure of trust.

The Banking Reform Program also includes objectives on confidence and transparency. The research has been conducted to provide baseline measures across trust, confidence and transparency, prior to the widespread industry implementation of these initiatives.

Thinking about each of the initiatives, how important are they in making banking better for you?

Work with ASICto expand its

regulatoryguidance on

customerremediation

programs

Removingindividualsfrom theindustryfor poorconduct

Strengtheningthe commitment

to customersin the Code of

Banking Practice

Ensure thehighest

standards ofwhistleblower

protectionin banks

Supportingcustomers

experiencingfinancial

difficultly andestablishinga new debtrepayment

service

Support theGovernment’s

review intoexternaldispute

resolution

Evaluate theestablishment

of a mandatory,prospective

compensationschemecoveringfinancialadvisers

Makingaccountswitching

easier

Reviewingproduct

salescommissionsand product

basedpayments

Providingbetter support

for smallbusiness

and farmers

Establishinga dedicatedCustomerAdvocate

in the banks

SupportingASIC as a

strongregulator

75%72% 70% 69% 68% 66% 64% 64% 63% 63% 62% 62%

This research is being conducted as part of measuring the impact of the Banking Reform Program and making sure the initiatives deliver better customer outcomes. This report is the first of several research activities that will track the results of the Banking Reform Program as it is implemented and progressed. Mr Ian McPhee is the independent governance expert overseeing the implementation of the initiatives and publishing quarterly progress reports4.

Building trust and confidence across the banking industry will take time, and this report will serve as an initial baseline benchmark against which the industry will measure its progress as these initiatives are adopted by banks.

4 https://www.betterbanking.net.au/accountability/

Question D3. Thinking about these initiatives, how important are they in making banking better for you? Please score these from 1-9, where 1 is “not important at all” and 9 is “very important” to you. The above data indicates the percentage of Australians who selected a score of 7-9 (top 3 box) on the importance scale.

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3 Awareness of the Banking Reform Program and its initiatives. 51% of consumers surveyed have some level of awareness of the Banking Reform Program (with 7% being very familiar with the details). When asked whether they agree or disagree with the following statement ‘The Banking Reform Program makes me optimistic about the future of banking’, 51% agreed. Half (50%) also agreed with the statement that the Banking Reform Program will make the relationship between banks and customers better.

These findings highlight the public’s receptiveness to reform. They also highlight a need for the industry to keep communicating publicly about its commitment to the program, and the benefits and outcomes these initiatives will deliver.

4 This research provides an important baseline of consumer perceptions of each initiative prior to widespread industry implementation. Developing a baseline prior to the widespread implementation of the Banking Reform Program’s initiatives sets the benchmark against which the success of these initiatives can be measured.

Prior to widespread implementation, the results show there is varied awareness among consumers of their main bank’s delivery against these initiatives over the last 12 months. Consumers are most aware of actions their main bank has taken in relation to the removal of individuals from the industry for poor conduct (53%), followed by a strengthening of commitment to the Code of Banking Practice (51%).

Lower levels of awareness apply to initiatives that have yet to be finalised and implemented. For example, the establishment of a mandatory, prospective last resort compensation scheme covering financial advisers, is subject to the Federal Government’s Ramsay Review.

As each initiative is further embedded into the banks, it will be both implementation and communication which will impact the performance of the initiative and consequently how these initiatives are received by customers.

How familiar are you with the Banking Reform Program?

7% 44% 49%

Am familiar with it Have heard of it, but don’t know much about it Never heard of it

Question D1. Last year the banks agreed to introduce a number of changes to make banking better for customers. These changes are called the Banking Reform program. How familiar are you with the Banking Reform Program?

53% 51%46% 44% 43% 43%

39% 38% 38% 38% 37% 36%

Removingindividualsfrom theindustryfor poorconduct

Strengtheningthe commitment

to customersin the Code of

Banking Practice

Reviewingproduct

salescommissionsand product

basedpayments

Work with ASICto expand its

regulatoryguidance on

customerremediation

programs

Supportingcustomers

experiencingfinancial

difficultly andestablishinga new debtrepayment

service

SupportingASIC as a

strongregulator

Providingbetter support

for smallbusiness

and farmers

Makingaccountswitching

easier

Establishinga dedicatedCustomerAdvocate

in the banks

Support theGovernment’s

review intoexternaldispute

resolution

Ensure thehighest

standards ofwhistleblower

protectionin banks

Evaluate theestablishment

of a mandatory,prospective

compensationschemecoveringfinancialadvisers

How well do you feel your main bank has delivered against each of the following in the past 12 months?

Question D4. Finally, how well do you feel your main bank has delivered against each of the following in the past 12 months, where 1 is “delivered extremely poorly” and 9 is “delivered extremely well”. The chart above indicates the percentage of the population who selected a score of 7-9 (top 3 box).

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5 Building trust, confidence and transparency will be driven by stability, regulation and reliability These findings indicate that trust, confidence and transparency across the industry is most likely to be driven through establishing and communicating the industry’s commitment to a stable, well-regulated and reliable banking industry.

Where respondents had high levels of trust in the industry, they believed that the industry was stable, well-regulated and reliable. They also highlighted being progressive and innovative, contributing to the community and focusing on customer needs as contributors to trust. Those who had lower levels of trust believed that the industry is driven by profit, not focused on customer needs and not open or transparent with banking fees and terms.

Whilst the implementation of the Banking Reform Program’s initiatives are critical to addressing many of these issues, it’s important for individual banks to demonstrate commitment to these drivers of trust.

Sentiments of those who have a high level of trust in the industry

Stable

48%

Wellregulated

43%

Reliable

43%

Progressive& innovative

34%

Contributingto community

33%

Focused oncustomer

needs

27%

Listening toconsumers

27%

Open &transparentwith bankingfees & terms

24%

Ethical

24%

Led by highlyregardedleaders

21%

Question B4. Which of the following best describes why you feel this way? The banking industry is...

Sentiments of those who have neutral and low levels of trust in the industry

Drivenby profit

85%

Not focusedon customer

needs

52%

Not open ortransparentwith banking

fees and terms

52%

Not listeningto consumers

47%

Unethical

40%

Not wellregulated

38%

Notaddressingsociety’s

needs

32%

Not reliable

15%

Not evolvingwith the times

11%

Unstable

8%

Question B5. Which of the following best describes why you feel this way? The banking industry is:

Question B3. How much do you trust the banking industry to do what is right? Please use a 1 to 9 scale, where 1 means you “do not trust them at all” and 9 means you “trust them completely”.

High trust - Top 3 Box

Neutral trust - Middle 3 Box

Low trust - Bottom 3 Box

Trust in the banking industry

31%

27%

43%

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6 Consumers need to know that the fundamentals, such as regulations and the Code of Banking Practice, are in place and adhered to. Based on focus group discussions, many consumers stated that their trust was based on the fact that banks are doing the right thing, keeping their money safe, and acting in an ethical way.

Other initiatives likely to drive trust relate to doing what is right by the customer (e.g. Strengthening commitment to customers in the Code of Banking Practice). Consumers surveyed also indicated that they feel banks are beginning to put customers first, and these initiatives will help drive trust.

The research identified a set of core initiatives that are likely to have the greatest influence on building trust, confidence and transparency for the industry:

Trust

1 Strengthening the commitment to customers in the Code of Banking Practice

2 Reviewing product sales commissions and product based payments

3 Establishing a dedicated Customer Advocate in the banks

4 Making account switching easier

5 Supporting ASIC as a strong regulator

6 Evaluate the establishment of a mandatory, prospective compensation scheme covering financial advisers

Transparency


2 Supporting customers experiencing financial difficulty and establishing a new debt repayment service


4 Supporting ASIC as a strong regulator


6 Providing better support for small business and farmers

Confidence


2 Supporting customers experiencing financial difficulty and establishing a new debt repayment service



5 Providing better support for small business and farmers

6 Evaluate the establishment of a mandatory, prospective compensation scheme covering financial advisers

Top drivers by program objective:

7 Consumer trust in their main bank is positive. Consumers express a more positive attitude to the level of transparency their main bank provides. When compared to the industry as a whole, consumers are more likely to show higher levels of trust and confidence in their main bank.

Trust, Confidence and Transparency in Main bank Trust, Confidence and Transparency in the industry as a whole

29%Confidencein bankingindustry

31%Trust thebankingindustry

24%Transparency

of bankingindustry

53%Trust in

main bank

46%Transparencyof main bank

52%Confidence in

main bank

Question C9. How much do you trust your main bank to do what is right based on a scale of 1-9? Please use a 1 to 9 scale, where 1 means you “do not trust them at all” and 9 means you “trust them completely”. (Top 3 Box)

Question C11. Overall how much confidence do you have in your main bank to do what is right Please indicate using a scale of 1 to 9, where 1 is “not confident at all” and 9 is “very confident”. (Top 3 Box)

Question C10. Overall how transparent do you feel your main bank is in the way it operates? Please use a 1-9 scale, where 1 means “not transparent at all” and 9 means “completely transparent”. (Top 3 Box)

Question B3. How much do you trust the banking industry to do what is right? Please use a 1 to 9 scale, where 1 means you “do not trust them at all” and 9 means you “trust them completely”. (Top 3 Box)

Question B8. Overall how much confidence do you have in the banking industry to do what is right. Please indicate using a scale of 1 to 9, where 1 is “not confident at all” and 9 is “very confident”. (Top 3 Box)

Question B7. Overall how transparent do you feel the banking industry is in the way it operates? Please use a 1-9 scale, where 1 means “not transparent at all” and 9 means “completely transparent”. (Top 3 Box)

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54 53

33 35 37 39 40 40 4145 46 47 50 50 51 52 55 57 58 60 62 65 65 66 68 69

7781 83

42

+2 +3 -3 +3 +3 +4 +1 +3 +1 +4 +4 0 +2 +4 +8 0 +1 +1 +1 +6 +6 +1 -8 +1 +1 +2 +1 +6 +9-1

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Fran

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Spai

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Swed

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Ital

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U.K

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Turk

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S. K

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Bra

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UAE

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Global trust in the Financial Services sector, 2016 vs. 2017

Distrusted in 11 countries

Distrust Neutral Trust

+ - Y-to-Y Change

8 Australians acknowledge that the banking industry is a well-regulated industry that is more stable than many of its international counterparts. Based on this year’s results of Edelman’s Annual Global Trust Barometer*, Australians’ trust in the Financial Services sector has increased by two percentage points year on year, moving from ‘distrusted’ to ‘neutral’. Whilst this reflects movement in a positive direction, Australia remains 4 points behind the global average, indicating there is more work to be done to increase trust in the sector. Of note, however, is Australia’s performance relative to other European nations, the majority of which are distrusted.

9 When we take a more detailed look at Australians’ trust in the Financial Services sector compared to other institutions (NGOs, Government, business and media), we see that 50% of the general population trust in the sector to ‘do what is right’. This is a 2 point increase compared to 2016, and indicates that trust in the Financial Services sector has moved from negative to neutral, and sits above trust in business, media and Government, (all of which are distrusted.)

Whilst this demonstrates positive progression, it also highlights the need to continue to work towards improving trust within the customers and communities the banking, and financial services industry more broadly, serves.

Australian trust in NGOs, Business, Media, Government and Financial Services, 2016 vs. 2017

2016 2017

NGOs Business Media Government Financial Services

Distrusted

Neutral

Trusted

5752 52 48

4232

4537

48 50

Three in four institutions distrusted

Q45-429. Please indicate how much you trust businesses in each of the following industries to do what is right. Again, please use the same 9-point scale where one means that you “do not trust them at all” and nine means that you “trust them a great deal”. (Top 4 Box, Trust Barometer) General Population, 28-country global total.

Q11-620. Below is a list of institutions. For each one, please indicate how much you trust that institution to do what is right using a nine-point scale, where one means that you “do not trust them at all” and nine means that you “trust them a great deal.” (Top 4 Box, Trust Barometer) General Population, Australia only

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ConclusionsThe Banking Reform Program has made progress, with the initial findings showing there is appetite for change among consumers and the initial results establishing a benchmark to measure progress.

This research highlights that further efforts are needed to raise awareness about the initiatives as they roll out, and that implementation must be done well so Australians can experience the positive impact of the initiatives in order to acknowledge that the industry is changing.

Along with implementation of the initiatives, these results indicate that trust in the industry is most likely to be driven through establishing and communicating the industry’s commitment to a stable, well-regulated and reliable banking industry.

There are two specific initiatives that are likely to make the greatest impact on how the industry and banks are perceived, namely Strengthening the Code of Banking Practice and Reviewing Product Sales Commissions and Product Based Payments.

In order to resonate with the public, it’s essential that commitment to the Code of Banking Practice is clearly and regularly communicated, to ensure that the public is aware of its implementation and evolution. It will also be important for the community to see the benefits of the Code of Banking Practice in their day to day interactions with their main bank.

Successful implementation of the initiatives should drive improvements across all indicators: trust, confidence and transparency.

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Research Approach

Four-staged approach for the consumer research, combining stakeholder input, qualitatitive and quantitative research.

Methodology – Research

Following the development of the hypothesis, the research was conducted in two stages, and included 12 consumer focus groups and an online survey of 1000 Australians. Six employee workshops were also completed to inform the next stage of research.

Sample outline for the consumer focus groups

• 12 focus groups, 1.5 hours each

• N=8 per focus group (a total of 96 Australians)

• Conducted in Sydney, Melbourne, Brisbane and Toowoomba

• Representative across demographics

Sample definition for the online survey

• N=1000 Australians aged 18 years old and above

• Nationally representative across state/region/territory

• Nationally representative across gender and age

• Good spread across income and education levels

• All data validity at 95% confidence level with a margin of error of 3.1%

The second stage is due to commence in October/November 2017 and will consist of both a consumer and an employee online survey to measure and understand the ongoing impact of the Banking Reform Program both internally and externally.

#1Hypothesis

Development

#2Consumer

Focus Group

#3Consumer

Survey

#4ResearchAnalysis

Hypothesis workshop toestablish priorities andtopics for assessment

May 2017

12 focus groupsacross 3 states

May - June 2017

Online surveyN=1000

Australians

June 2017

Analysis andreport writing

July 2017

Appendix

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1 Reviewing product sales commissions and product based payments. Building on the ‘Future of Financial Advice’ reforms, the ABA will immediately establish an independent review of product sales commissions and product-based payments with a view to removing or changing them where they could lead to poor customer outcomes.

Through these reforms, the ABA intends to strengthen the alignment of remuneration and incentives and customer outcomes. ABA members will work with regulators to implement changes and, where necessary, seek regulatory approval and legislative reform. Each bank commits to ensure it has overarching principles on remuneration and incentives to support good customer outcomes and sound banking practices

2 Making it easier for customers when things go wrong. Enhancing the existing complaints handling processes by establishing an independent customer advocate in each bank to ensure retail and small business customers have a voice and customer complaints directly relating to the bank, and the third parties appointed by the bank, are appropriately escalated and responded to within specified timeframes.

This includes:

• Broadening external dispute resolution schemes

• Supporting the Government’s announcement to conduct a review into external dispute resolution, including the Financial Ombudsman Service (FOS) conducting a review of its terms of reference with a view to increasing eligibility thresholds for retail and small business customers

• Working with ASIC to expand its current review of customer remediation programs from personal advice to all financial advice and products

• Evaluating the establishment of an industry wide, mandatory last resort compensation scheme covering financial advisers

• Supporting a prospective scheme being introduced where consumers of financial products who receive a FOS determination in their favour would have access to capped compensation where an adviser’s professional indemnity insurance is insufficient to meet claims.

3 Reaffirming support for employees who ‘blow the whistle’ on inappropriate conduct. These reforms will ensure the highest standards of whistleblower protections by ensuring there is a robust and trusted framework for escalating concerns. The protection of whistleblowers across banks, including independent support, and protection against financial disadvantage will be standardiased. As part of this, the ABA will work with ASIC and other stakeholders.

4 Removing individuals from the industry for poor conduct. The ABA will implement an industry register which would extend existing identification of rogue advisers to any bank employees, including customer facing and non-customer facing roles. This will help prevent the recruitment of individuals who have breached the law or codes of conduct.

5 Strengthening the commitment to customers in the Code of Banking Practice. The ABA will bring forward the review of the Code of Banking Practice. The Code of Banking Practice is the banking industry’s customer charter on best practice banking standards, disclosure and principles of conduct. The review will be undertaken in consultation with consumer organisations and other stakeholders, and will be completed by the end of the year.

Summary of the Banking Reform Program Initiatives

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6 Supporting ASIC as a strong regulator. The ABA supports the Government’s announcement to implement an industry funding model. The industry will work with the Government and ASIC to implement a ‘user pays’ industry funding model to enhance the ability for ASIC to investigate matters brought to its attention, as well as working with ASIC to enhance the current breach reporting framework.

Additional initiatives

7 Making account switching easier. The ABA held a ‘Switching Roundtable’ in March 2017, bringing together regulators, consumer groups, government representatives, banks and the card schemes. The key points identified as barriers to switching were:

• Difficulty of closing accounts, particularly card schemes

• Difficulty of cancelling and transferring periodic payments

• The slowness and limited scope of the current APCA switching facility, and

• The need for simpler explanatory material and better customer education.

Banks are working through issues raised by consumer representatives and stakeholders and identifying solutions and timeframes for their delivery, which will need to be supported by the payments industry, card schemes and consumer groups. The ABA will include the revised industry protocols and standards in the new Code of Banking Practice.

8 Providing better support for small businesses and farmers. For the first time, the new Code of Banking Practice will include a separate section for small businesses with commitments to simplify terms and conditions and give more notice when loan contracts change. The industry is also developing new industry guidelines on how and when banks can appoint investigative accountants and receivers, administrators or liquidators for a small business or farm property and the use of valuation practices.

These new guidelines are being developed in consultation with small business representatives and will be published ahead of the new Code. Banks also continue to advocate with the Federal and State governments for national farm debt mediation.

Farm debt mediation is a simple, structured and confidential negotiation process where an independent mediator assists the farmer and the bank or other lender to reach agreement about current and future debt arrangements.

9 Supporting customers experiencing financial difficulties and establishing a new debt repayment service with financial counsellors. The industry is improving financial hardship assistance programs with new commitments to be included in the new Code of Banking Practice.

For example, banks will proactively identify if someone is at risk of getting into financial difficulty so they can work with their customer to help prevent a situation worsening. Banks are also working with financial counsellors to establish a new debt repayment service for people struggling with multiple debts.

This new service would be free for people to access and get assistance to put in place a repayment plan to pay off their debts with banks and other lenders and creditors. The industry is looking to get this new service up and running in 2017.

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Reference for Initiatives

Initiative

Reviewing product sales commissions and product based payments

Establishing a dedicated Customer Advocate in the banks

Support the Government’s review into external dispute resolution

Work with ASIC to expand its regulatory guidance on customer remediation programs

Evaluate the establishment of a mandatory, prospective compensation scheme covering financial advisers

Ensure the highest standards of whistleblower protection in banks

Removing individuals from the industry for poor conduct

Strengthening the commitment to customers in the Code of Banking Practice

Supporting ASIC as a strong regulator

Making account switching easier

Supporting customers experiencing financial difficulty and establishing a new debt repayment service

Providing better support for small business and farmers

Statements posed to respondents regarding importance of initiatives

Reviewing the way bank employees are rewarded and incentivised to ensure that the needs of customers comes first.

Appointing an independent customer advocate in each bank. The role of the customer advocate is to help ensure customers have a voice and they have another avenue for their complaints to be heard.

Helping the Government establish an accessible and external body for customers who have a dispute with their bank.

Establishing standards that banks must follow to correct issues and compensate customers when things go wrong.

Funding a new compensation scheme to compensate people who have been given bad financial advice by an adviser who has gone out of business.

Protecting bank employees who blow the whistle on inappropriate conduct.

Removing individuals from the industry for poor conduct.

Updating the Code of Banking Practice to ensure banks’ standards of conduct meet current customer’s expectations.

Supporting ASIC, the regulator of the banking industry, by providing them with the funds to do more and by implementing a clear and transparent process for banks to report issues to them.

Helping customers understand how they can switch banks and introducing ways to make switching banks simpler and easier for customers.

Supporting customers experiencing financial difficulties and establishing a new service for people struggling with multiple debts.

Improve banks’ commitments to small businesses and farmers by being more transparent and flexible with loan arrangements and building small business and farmer financial literacy.

Statements posed to respondents regarding delivery of initiatives

Bank employees are motivated to do what’s right by customers not by what is more beneficial to them.

There is someone in the bank who represents my interests as a customer and who will review my complaints objectively and independently of the bank.

There is an alternative and effective avenue outside of the bank that I can use to have disputes with my bank heard.

When banks get it wrong they will do all they can to make things right for their customers.

If I received poor financial advice I am confident that I would be compensated.

Banks make it safe for their employees, and other business partners to raise issues or concerns of poor conduct within the organisation.

I have confidence that bank employees are ethical and act with integrity.

Banks operate to a high standard of conduct that meets my expectations.

The finance sector is overseen by strong regulators that keep the banks in check.

Banks are making it easier for customers to switch to another bank.

If I ever had trouble repaying my debts I believe my bank would help me get back on track.

Banks support small business and farmers to be successful.

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Methodology – Driver Analysis

Driver analysis identifies the effect of each initiative on trust, transparency and confidence, in order to provide focus for the industry moving forward.

Detailed Methodology: At 95% confidence interval, researchers conducted a multivariate regression driver analysis, built on a linear probability discrete choice model for both importance as well as trust, transparency and confidence. This meant that:

• Each initiative was identified as a potential driver and converted into a dichotomous discrete 0/1 variable per response. Each response was recoded as 0 if a respondent selected a score between 1-6, and recoded as 1 if a respondent selected a score between 7-9 on the scale.

• This was performed for the questions on initiative importance, trust, transparency and confidence, and a linear relationship between two variables (importance and trust or confidence or transparency) was then established

• From this, Edelman Intelligence measured the likelihood that perceived importance of an initiative would statistically predict the trust consumers have that the Banking Reform Program would increase trust, transparency or confidence`.

• Following analysis, quadrant maps were plotted based on stated importance of Banking Reform Program initiatives versus the derived impact on trust, transparency and confidence, to highlight key focal areas for the Banking Reform Program to succeed in Australia.

Methodology – Trust Barometer

*The Edelman Annual Trust Barometer has been conducted globally for the past 17 years and includes 28 different countries. The study focuses on shifting levels of trust across the world and across sectors. Each year respondents are asked to rate the importance of a series of attributes in building trust. The analysis focuses on a Top 4 Box approach (ie those who score 6 or more on a 9 point scale) to define those who show some level of trust in an industry, category or institution.

The Banking Reform Program implemented the same framework of questions to assess trust, confidence and transparency in the banking sector. The analysis focused on a Top 3 Box approach (ie those who score 7 or more on a 9 point scale) to define those who showed a strong level of trust, confidence and perceived transparency in the industry. This research was looking to identify consumers who felt strongly (either positively or negatively) towards the areas investigated.

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