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Banking inquiry: nobody fired for denying life insurance payouts, Commonwealth boss says – live Banking inquiry: nobody fired for denying life insurance payouts, Commonwealth boss says – as it happened
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Thanks very much for joining us for our live coverage.
Hearings continue with the ANZ appearing before the committee on Wednesday and then NAB and Westpac on Thursday.
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CBA fronts banking inquiry amid fresh concerns over CommInsure scandal - as it happened
The first day of hearing’s into the big four banks by the House of Representatives Economics Committee has concluded, and Commonwealth Bank of Australia executives will probably sleep easy after holding up under questioning.
Here’s what we learned:
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In a statement after the hearing Greens MP Adam Bandt has taken aim at the CBA for refusing to reveal the profits it makes on home mortgages, which its executives said was commercially sensitive information.
“The bank also failed to rule out asking for government assistance if faced with another global financial crisis,” he said.
After one day, it is clear a royal commission is the only way we will get the banks to come clean on how much profit they make off the back of home owners and public subsidies.
The government’s ‘too big to fail’ policy means the big banks get to obtain funds more cheaply than their smaller competitors, but that benefit just goes straight to their bottom line rather than back to the public.
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Labor says committee not good enough and it will keep up push for royal commission
Labor’s financial services spokeswoman, Katy Gallagher, told the press conference today’s hearing shows the committee doesn’t have “the power, the scope or the time” to get to the bottom of problems in the banking industry.
Gallagher confirmed Labor will continue to push for a royal commission.
Both she and deputy committee chairman, Matt Thistlethwaite, expressed outrage that no CommInsure advisers had lost their jobs over scandals at the bank’s insurance arm.
Asked whether anything good had come of the hearings, Gallagher said CBA’s apparent openness to a bank tribunal was “another stitch-up” and such a body would only be designed to give the prime minister an excuse not to hold a royal commission.
Thistlethwaite said CBA executives had “cunningly avoided” questions about victims. When asked to nominate such an evasion, he said the CBA had not explained how incentives such as pay structures forced employees to push products that weren’t in their customers’ best interests.
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Formal proceedings have closed at the House of Representatives Economics Committee examining Australia’s big four banks. But don’t go anywhere.Formal proceedings have closed at the House of Representatives Economics Committee examining Australia’s big four banks. But don’t go anywhere.
Labor’s financial services spokeswoman, Katy Gallagher, and the deputy chairman of the committee, Matt Thistlethwaite, will hold a press conference which I’ll dash off to then give you a summary of what we learned.Labor’s financial services spokeswoman, Katy Gallagher, and the deputy chairman of the committee, Matt Thistlethwaite, will hold a press conference which I’ll dash off to then give you a summary of what we learned.
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Brian Loughnane is consulting for the Commonwealth BankBrian Loughnane is consulting for the Commonwealth Bank
Ian Narev has confirmed that the former federal director of the Liberal party, Brian Loughnane, is consulting for the Commonwealth Bank.Ian Narev has confirmed that the former federal director of the Liberal party, Brian Loughnane, is consulting for the Commonwealth Bank.
Brian Loughnane is not employed by the CBA. It is a matter of common record that he and a number of other people have helped us generally in thinking through how we respond to a number of issues.Brian Loughnane is not employed by the CBA. It is a matter of common record that he and a number of other people have helped us generally in thinking through how we respond to a number of issues.
Asked whether that included helping the bank avoid a royal commission, Narev said the advice related to “putting the best foot forward for customers and the families that own us”.Asked whether that included helping the bank avoid a royal commission, Narev said the advice related to “putting the best foot forward for customers and the families that own us”.
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Matt Thistlethwaite is asking why the Commonwealth Bank lobbied against tighter financial advice regulation during the Abbott government era on the basis regulation was “unnecessary complexity”.Matt Thistlethwaite is asking why the Commonwealth Bank lobbied against tighter financial advice regulation during the Abbott government era on the basis regulation was “unnecessary complexity”.
Ian Narev says its concerns were about “unintended consequences” that would “in the end not mean that customers were better off”.Ian Narev says its concerns were about “unintended consequences” that would “in the end not mean that customers were better off”.
Thistlethwaite focuses on removing the requirement that financial advisers act in the “best interests” of clients, and Narev points to uncertainty of what “best interests” is adding to the cost of financial advice.Thistlethwaite focuses on removing the requirement that financial advisers act in the “best interests” of clients, and Narev points to uncertainty of what “best interests” is adding to the cost of financial advice.
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Labor’s Matt Thistlethwaite is in for a second round of questions, asking how much compensation was provided to customers of three financial planners struck off by the Australian Securities and Investment Commission.Labor’s Matt Thistlethwaite is in for a second round of questions, asking how much compensation was provided to customers of three financial planners struck off by the Australian Securities and Investment Commission.
Chief risk officer, David Cohen, said there was no compensation for customers of one, $1m for those of another, and $247,000 for those of the third.Chief risk officer, David Cohen, said there was no compensation for customers of one, $1m for those of another, and $247,000 for those of the third.
Of 6,000 financial advice customers whose cases have been reviewed, 800 got compensation.Of 6,000 financial advice customers whose cases have been reviewed, 800 got compensation.
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CBA "completely open" to restructure of pay to prevent conflicts: NarevCBA "completely open" to restructure of pay to prevent conflicts: Narev
Ian Narev has addressed the perception that bank staff have a conflict of interest because they are paid commission to sell financial products.Ian Narev has addressed the perception that bank staff have a conflict of interest because they are paid commission to sell financial products.
Narev said conflicts of interest are part of the review with the Australian Banking Association.Narev said conflicts of interest are part of the review with the Australian Banking Association.
We’re looking at that very closely, not only actual conflicts but also potential conflicts of interest. Our minds are completely open to changes that may need to come from that.We’re looking at that very closely, not only actual conflicts but also potential conflicts of interest. Our minds are completely open to changes that may need to come from that.
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Adam Bandt has had a stoush with Ian Narev about whether CBA wants house prices to stay high so the amount and value of home loans stays high.Adam Bandt has had a stoush with Ian Narev about whether CBA wants house prices to stay high so the amount and value of home loans stays high.
Narev replied:Narev replied:
The conditions that are right for Australia in the long term are the conditions that are right for the Commonwealth Bank. We’re not interested in short term distortions.The conditions that are right for Australia in the long term are the conditions that are right for the Commonwealth Bank. We’re not interested in short term distortions.
Bandt notes that 80% of Narev’s pay is contingent, largely on increasing returns to shareholders. He questions whether this leads to a bank structure tailored to writing more housing loans.Bandt notes that 80% of Narev’s pay is contingent, largely on increasing returns to shareholders. He questions whether this leads to a bank structure tailored to writing more housing loans.
Narev replied:Narev replied:
One of the key determinants of everybody’s remuneration is doing the right thing by customers.One of the key determinants of everybody’s remuneration is doing the right thing by customers.
He accepts that there is “some component relation to performance” but insists the customers come first.He accepts that there is “some component relation to performance” but insists the customers come first.
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Bandt has asked whether the banks have passed the cost of the government guarantee scheme onto customers through higher interest rates.Bandt has asked whether the banks have passed the cost of the government guarantee scheme onto customers through higher interest rates.
He replied:He replied:
There will be a cost to regulation, some of it will be passed on to customers.There will be a cost to regulation, some of it will be passed on to customers.
But Narev insists some of the cost is also passed on to shareholders, pointing to the fact CBA’s return on equity has dropped from 22.1% in 2007 to 16.5% in 2016.But Narev insists some of the cost is also passed on to shareholders, pointing to the fact CBA’s return on equity has dropped from 22.1% in 2007 to 16.5% in 2016.
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Greens MP Adam Bandt is doing his questioning by telephone – he is in Melbourne because his wife is about to give birth.Greens MP Adam Bandt is doing his questioning by telephone – he is in Melbourne because his wife is about to give birth.
Bandt wants to know whether CBA gets cheaper credit than smaller banks because it is judged to be “too big to fail” and the government will step in and save it if it gets in trouble.Bandt wants to know whether CBA gets cheaper credit than smaller banks because it is judged to be “too big to fail” and the government will step in and save it if it gets in trouble.
Ian Narev replied:Ian Narev replied:
It’s difficult to judge any assessments global funders are making in relation to future government decisions.It’s difficult to judge any assessments global funders are making in relation to future government decisions.
Bandt suggests the International Monetary Fund has put the CBA and big banks’ advantage at 0.2% and Narev doesn’t quibble with the figure.Bandt suggests the International Monetary Fund has put the CBA and big banks’ advantage at 0.2% and Narev doesn’t quibble with the figure.
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Liberal MP, Scott Buchholz, is asking about why credit card interest rates are so high.Liberal MP, Scott Buchholz, is asking about why credit card interest rates are so high.
Ian Narev says credit cards are “high-risk unsecured debt”.Ian Narev says credit cards are “high-risk unsecured debt”.
The risks are higher and that flows through into pricing ... This is in some degree the riskiest debt we have.The risks are higher and that flows through into pricing ... This is in some degree the riskiest debt we have.
Asked whether credit card rates strike the right balance in fairness to customers, Narev said:Asked whether credit card rates strike the right balance in fairness to customers, Narev said:
There are some products that could be a bit more cheap, there are some products that could be a bit more expensive.There are some products that could be a bit more cheap, there are some products that could be a bit more expensive.
He added that customers are advised when a loan might be more appropriate than a credit card debt.He added that customers are advised when a loan might be more appropriate than a credit card debt.
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Chief risk officer, David Cohen, has told the committee compensation has been paid to the customers of three CBA financial advisers delisted by the Australian Securities and Investment Commission.Chief risk officer, David Cohen, has told the committee compensation has been paid to the customers of three CBA financial advisers delisted by the Australian Securities and Investment Commission.
He said customers affected by poor advice are told when advisers are moved off their case before the advisers are actually struck off.He said customers affected by poor advice are told when advisers are moved off their case before the advisers are actually struck off.
If you want a sense of how common it is for financial planners to lose their registration, here’s a timeline of banking scandals Guardian Australia published in April.If you want a sense of how common it is for financial planners to lose their registration, here’s a timeline of banking scandals Guardian Australia published in April.
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Matt Keogh has asked about the $2.8m of Ian Narev’s pay based on performance. Commonwealth Bank and other companies are under fire for paying executives extra for things that should be core business, such as customer satisfaction.Matt Keogh has asked about the $2.8m of Ian Narev’s pay based on performance. Commonwealth Bank and other companies are under fire for paying executives extra for things that should be core business, such as customer satisfaction.
Narev explains his pay is set by the board and shareholders.Narev explains his pay is set by the board and shareholders.
It’s performance-based remuneration – nowhere should it be described as a bonus.It’s performance-based remuneration – nowhere should it be described as a bonus.
Narev rattles off consumer surveys that show Commonwealth customers are happy with the bank. He said he took a hit on pay because the bank’s response to financial advice controversies was “not good enough”.Narev rattles off consumer surveys that show Commonwealth customers are happy with the bank. He said he took a hit on pay because the bank’s response to financial advice controversies was “not good enough”.
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