The corporate watchdog has ordered the country's major banks to review their cross-selling practices in the wake of the scandal engulfing United States lender Wells Fargo.
Australian Securities and Investments Commission deputy chair Peter Kell told a parliamentary committee on Friday the regulator had written to a group of major banks in the last week requiring them to conduct audits on cross-selling, where banks seek to sign customers up for multiple products, often in wealth management.
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Big US bank pays $190m in customer fraud case
Wells Fargo, the largest US bank by market capitalisation, will pay $190 million for opening two million deposit and credit card accounts that may not have been authorized.
US lender Wells Fargo has been embroiled in a scandal that last month prompted the chief executive John Stumpf to resign, after staff were found to have created millions of fake bank accounts in order to meet sales targets.
Local banks being forced to conduct the reviews included ANZ Bank, Commonwealth Bank, National Australia Bank, Westpac, Suncorp, Citi, Bank of Queensland and HSBC, Mr Kell said.
They will be required to present the findings to the regulator, which also expressed the view that cross-selling would be increasingly frowned upon in the market amid concerns about conflicts of interest.
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"We want to make sure, and we want to be able to reassure yourselves and the Australian public, that we don't a have Wells Fargo-type problem in Australia," Mr Kell told the hearing.
Australian banks have long pursued cross-selling, but ASIC chairman Greg Medcraft suggested banks would face pressure to wind back their use of this tactic.
Conflicts of interest
He said he thought the market was "frowning upon" cross-selling after the Wells Fargo scandal, as ASIC officials also were questioned over the risks for consumers created by vertical integration - where banks own associated businesses such as wealth management firms.
ASIC officials said vertical integration created conflicts of interest for staff, who had incentives to sell products created by the bank, but were also expected to serve the interests of their clients.
Australian banks had lower levels of cross-selling than Wells Fargo with three to four products per customer, compared with up to eight products per customer at the embattled US lender.
ASIC has been ramping up pressure on banks after a series of scandals in wealth management especially, and as the government pushes back against Labor's call for a royal commission into finance.
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