The Australian Financial Review overlooked a key part of Reserve Bank governor Glenn Stevens’ address to its so-called “Banking & Wealth Summit” yesterday — possibly because it was aimed at many of the people in the room, and not in a complimentary sense.

Yesterday Stevens got stuck into the banks on conduct and trust, two issues that have been prominent for all the wrong reasons in the big bank-controlled financial planning area of late.

The AFR and others picked up the Stevens’ warnings on the rising risk for retirees and others in chasing high returns at a time of low growth for some time to come. But they missed the governor taking an oar to the banks’ conduct in a roomful of bank CEOs and board members.

Stevens left his remarks to the very end of his speech, and they’re worth quoting at length.

“And the final issue is misconduct. This has loomed larger for longer in many jurisdictions than we would have thought likely a few years ago. Investigations and prosecutions for alleged past misconduct are ongoing. It seems our own country has not been entirely immune from some of this. Without in any way wanting to pass judgement on any particular case, root causes seem to include distorted incentives coupled with an erosion of a culture that placed great store on acting in a trustworthy way.

“Finance depends on trust. In fact, in the end, it can depend on little else. Where trust has been damaged, repair has to be made. Both industry and the official community are working hard to try to clarify expected standards of behaviour. Various codes of practice are being developed, calculation methodologies are being refined, and so on. In some cases regulation is being contemplated. Initiatives like the Banking and Finance Oath also can make a very worthwhile contribution, if enough people are prepared to sign up and exhibit the promised behaviour.

“In the end, though, you can’t legislate for culture or character. Culture has to be nurtured, which is not a costless exercise. Character has to be developed and exemplified in behaviour. For all of us in the financial services and official sectors, this is a never-ending task.”

Bang. Translated from central bankese, that’s a real slap directed at the big banks, in particular, who along with AMP control the retail super sector and who have been implicated in a series of scandals over financial planner conduct so damaging the sector itself called for external government oversight even as the government was trying to deregulate it via the repeal of the FOFA consumer protections.

Now, this isn’t the first time the bank has made such criticisms — a month ago in the first Financial Stability Review of 2015, the bank singled out the “conduct and culture” of the banks and wondered if this indicated there would be weaknesses in other areas of their operations, such as home lending.

“Another area of focus for Australian banks is their conduct and culture,” the bank wrote. “These issues are receiving greater attention among market commentators and the global regulatory community, following a number of conduct-related problems that have resulted in substantial legal expenses for certain global banks. Australian banks are required to maintain a sound operational risk framework that ensures the proper functioning and behaviour of systems, processes and people; complex and diversified banks should have a more robust framework in place. Banks are also expected to understand their ‘risk culture’, which can be thought of as the way the management of risk is viewed in practice across the institution. Conduct-related events in one area of a banking group may be a signal of broader governance, cultural and risk management deficiencies, and could give rise to entity-wide reputational risks.”

“Entity-wide reputational risks.” That’s more or less what’s been unfolding as banks like the Commonwealth and ANZ scramble to fix the damage caused by their — and ASIC’s — mishandling of financial planner misconduct.

And identifying “distorted incentives” to a roomful of senior banking officials is a fairly clear way of saying that the boards, CEOs and senior managers of these institutions, who are the ones who set remuneration, have responsibility for fixing a system that distorts and erodes culture and trustworthiness.

Suing whistleblowers, going after journalists, offering half-baked compensation schemes and belatedly issuing mea culpas is simply not good enough.

Stevens invoking trust and “broader governance, cultural and risk management deficiencies” is also significant in other areas. He is telling us the RBA is now wondering if the banks and other financial groups can be trusted in other areas.

That doesn’t augur well for the banks’ whining about higher capital requirements and other changes proposed by the Murray Inquiry in its interim report.

Australian banks aren’t guilty of the sort of rampant misconduct (in fact, actual crime) that we’ve seen from offshore giants such as JPMorgan, Deutsche Bank, Barclays, Goldman Sachs and Morgan Stanley, which have been fined tens of billions of dollars for a variety of serious crimes.

But the RBA is sending a very clear message that misconduct might have ramifications well beyond angry retirees and sacked financial advisers.