Ross Greenwood speaks to David Coleman, Chair of the House of Reps Standing Committee on Economics, about the CBA CEO and Chair facing the inquiry over the AUSTRAC claims.
Introduction: Did the Commonwealth Bank CEO survive his grilling?
Ross Greenwood: I also want to take you to another thing which was a fiery encounter inside our Parliament House today. This was the very first time that the Commonwealth Bank was in front of the House of Representatives standing committee on economics which is having a bank inquiry on a regular basis. Now the thing about this war is that clearly, you’ve got now, more than 54,000 separate charges being brought on a civil basis by AUSTRAC the anti-money laundering authority that claims that the Common Wealth Bank that breached its requirements to report any transaction of more than $10,000.
Well, the chairman of that committee is David Coleman and certainly the encounter with the chairman of the Common Wealth Bank Katherine Livingston well, it was a little bit tasty.
Interview with: David Coleman, Chair of the House of Reps Standing Committee on Economics
David Coleman: You signed off on a remuneration report that found all metrics had been met and one which actually relates to risk where there is billions of dollars of exposure was above target. It is very, very hard to see how at bare minimum that is not extraordinarily incompetent if not more problematic for the individual directors in there. Surely it must be the case that the board has manifestly filed its duty with respect to the remuneration report.
Katherine Livingston: The decision process that goes into remuneration takes into account as you’ve pointed out risk and control matters. The basis on which the board reached those conclusions and specifically in relation to the fail TTRs is actually relevant to the AUSTRAC proceedings and therefore I’m just not in a position to comment.
Ross Greenwood: Okay, interesting stuff. In other words suggesting the board had failed in its duty. Well, the chair of the house representative standing committee on economics David Coleman is on the line right now. Many thanks for your time David.
David Coleman: Good to be with you Ross.
Ross Greenwood: Okay. This is the first time that the Common Wealth Bank had in front of your committee since the AUSTRAC allegations had come out. We’re you satisfied with the responses you heard from both the chairman of the Common Wealth Bank, Katherine Livingston and also the chief executive Ian Narev?
David Coleman: Well, look there are very serious questions that still remain unresolved, Ross. If you look back at 2015/16 the board by its own admission was aware of these matters in relation to the as you said the 54,000 such so-called TTRs that hadn’t been disclosed. The fact is the board did not disclose that to the market. It’s also the fact that in 2015/16, the board signed off on a remuneration report that basically said that the executive team had met all KPIs and that all elements of this short-term incentive were being successfully achieved.
Ross Greenwood: I’m I right to say, David I’m going to jump in now and say that your basic issue with that is that they’ve signed on all the KPIs as you call them the Key Performance Indicators, not withstand the fact that the bank even at that stage was aware of the investigation and if you like the accusations that had come from AUSTRAC?
David Coleman: Yes, that’s right. The bank by its own admission was aware that there had been tens of thousands of breaches, the requirement to report the potentially suspicious transactions. It means that back in 2015 but at the end of 2015/16 it’s obvious it didn’t disclose to the market and secondly, in its remuneration report, it said that all of the performance indicators of the management team had been met. It’s very reasonable to question, Ross, whether the board was doing its job in 2015/16. In 2016/17 and after the AUSTRAC matter became public, the board then acted and cut executive bonuses and the board members, things as well. What was said today was that that was done in response the reputation risk to the bank after the AUSTRAC matter became public.
The real issue is not just what AUSTRAC made public, the real issue is what actually happened. It’s clear that there were substantial amount of that activity, the board was well aware of that close to two years before it became public. I think there are several issues to be investigated and certainly, AUSTRAC is doing so. The chairman and said he’s looking into that and looking into any related directive duty issues and so on and that’s entirely appropriate.
Ross Greenwood: I know it’s certainly that the Common Wealth Bank has been the subject of most of the damning allegations against our four major banks in the last little whiles. We’re thinking about financial planning scandals, we’re thinking about issues in regards to insurance arm which is now being sold off called CommInsure and about whether doctors were asked to change patients diagnoses to make certain that I did not have to pay claims. Then on top of that now you’ve got this situation with AUSTRAC and whether the Common Wealth Bank in a timely manner or indeed at all reported potentially suspicious transactions of more than $10,000 to anti-money laundering organization. The question is you’ve got the big four banks before. You today saw both the National Australia Bank and also the Commonwealth. Are you satisfied that there is not any systemic issues running right through these banks? That’s what you’re trying to get to the bottom of to find out whether they are accountable for their actions and what takes place.
David Coleman: Well, certainly in relation to these AUSTRAC type issues we asked each of the CEOs for the other three banks that exact question Ross, and they all said that they were not aware of any such issues and in many cases they said that they’d been essentially cleared by AUSTRAC without there being any issues. Certainly, they’re representing that that’s not the case. As you know a big part of this inquiry is about improving the banking system more generally.
That’s why the inquiry recommended the ACCC goes into the banks to really scrutinize the policies of the banks in relation to the Australian interest rates. That’s why the government is setting up the Banking Executive Accountability Regime to improve accountability in the future. We talk a lot about getting redressed when things go wrong for customers and as you know that’s been really hard in the past. We’re fixing that by setting up a one-stop shop for the Australian Financial Complaints Authority.
As you’ve also seen, we’ve got the banks to move in relation to low-cost credit cards. Three of the four have moved on that. We’ve also had success in terms of the ATNC being abolished. There’s a lot of good things happening here Ross but obviously, there are still concerns about various issues in the banking sector and that’s what we’ll continue to focus on.
Ross Greenwood: Do we have to be at all concerned about the public’s attitude and view of our major banks? Yes, we want them accountable, yes, we want them to treat us well, yes, we want them to be honest but by the same token, we also want people to have faith in our banks. Is there any concern that the faith in the big banks could be eroded by the constant investigations into them?
David Coleman: Well, look, Ross, you’re right. The strength and stability of the banking system is very important. We all benefit from that. The last thing, of course, we would ever want to do is see these sort of things happen that happened after the GFC in Europe and the United States. The strength and confidence and profitability of the banking sector is a positive thing for the country and we should never forget that. But by the same token Ross, the fact that strength is important doesn’t mean that any behaviour by banks is okay. It’s not.
A part of being strong is being responsible and it’s about also about doing the right thing. Where there are examples of banks doing the wrong thing that needs to be held to account. That’s an appropriate function for the parliament as I said we’ve made a number of reforms to laws and other matters in the last year to address some of these issues but it’s certainly not the case that just because we want stability that we don’t also very thoroughly investigate wrongdoing. We need to do both.
Ross Greenwood: The other issue today that came out was the National Australia Bank which was something I had not heard of before. That was in regards to some 2000 occasions when staff had come forward where there were declarations on forms regarding a person’s superannuation as to who might get that money. The bank says that there is an issue here. Can you just explain exactly why that’s so important?
David Coleman: Yes. Well, what this is about Ross is there are about 2,000 occasions when somebody at NAB falsely declared that they had witnessed a document that they hadn’t and this was in relation to people declarations about who they wanted to be the beneficiary of their superannuation balance on reason of their death. Now, the bank says well, there was a certain witness who fraudulently said they’ve witnessed that when they haven’t. The fact is by the bank’s own admission on 2,000 occasions, somebody has signed to say they’ve witnessed a document that they haven’t. That’s obviously a systemic issue. The bank said that more than 300 people have owned up to being involved in this. NAB has said that it’s going to be publishing the results of its internal survey and the internal investigation, including at the involvement from ACIC next month.
Ross Greenwood: To tell you what, it’s going to be interesting to watch that as well. David Coleman. We’ll keep an eye on that one as well. Because remember, this about who gets the superannuation and remember that what you write on that super fund when you first join that, unless you change it, it could certainly direct it way from your intended person. That even though they might be in your will. David Coleman is the Chair of the House of Representatives standing committee on economics that does inquire into the banks on a regular basis. And David, I appreciate your time.
David Coleman: Thanks, Ross.
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