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Banking chiefs face royal commission – live Banking chiefs face royal commission – live
(35 minutes later)
Orr talks a little about the decision to call the chief executives of the big four banks. She says they were chosen because they play a “pivotal” role in the operation of the banking sector in Australia. Orr asks Comyn another open question. What’s going to be the hardest thing for CBA to address? He says CBA’s culture is difficult to measure, and therefore difficult to change. He also says the bank will find it difficult to better manage “non-financial risk”.
It is not possible to call executives from every entity that has been the subject of a case study... as a result the commission will call a selection of executives from a selection of entities. The larger change around the culture of the organisation, that is in some ways harder to measure, and obviously the management of non-financial risk has been a clear failing ... but I think that is something that is more readily observable.
These four institutions hold approximately three quarters of the total assets held by authorised deposit taking institutions in Australia. Rowena Orr asks Matt Comyn what he personally sees as the most concerning failing of the CBA, common across all of its misconduct.
I think is because in too many instances we did not understand the relationships, the various relationships which do differ [across CBA’s products] ... and therefore a clear understanding of the duties and obligations associated with that.
Orr asks for clarity about what he means. He explains he means the relationships the banks had for different customers across the wide range of its businesses. He said understanding those relationships was key to knowing the bank’s obligations to each customers. It would have prevented the bank from charging customers for fees without service, for example.
Orr asks how the bank could not have understood its obligations to customers. Comyn says:
I think we should have, Ms Orr
Orr responds:
Why didn’t you? What do you put that down to, Mr Comyn?
Comyn:
Well, a culture of us not learning from issues of misconduct in the past.
Matt Comyn is now giving evidence. Rowena Orr is asking him about a submission made by CBA about the causes of misconduct.
Orr:
You identified two categories of root causes, do you recall that?
Comyn:
Yes . I do.
Orr:
The first relates to what you describe as customer and culture.
Comyn:
Yes.
The “customer and culture” cause describes a failure by CBA to prioritise customer interests, or consider properly the duty they owed to customers. It has led – “consciously or unconsciously” – to decisions that put the bank’s financial gain over the customer interest.
The bank has also failed to properly consider non-financial risks in its practices, Comyn said. It also failed to properly consider external voices.
The second root cause is failings of “accountability, governance, and capability”.
The bank had inadequate capability in critical areas, particularly “operational risk and compliance”. Orr asks “how did that happen”, in a business as big as CBA? Comyn says:
I don’t have an adequate explanation for that.
While we wait, let’s quickly recap what we’ve previously heard from Matt Comyn. He’s only been in the top job since April, but has worked at CBA since 1999.
We heard from him at an inquiry by the House of Representatives standing committee on economics last month. He offered an apology and described CBA’s conduct as “unacceptable”. He told that inquiry:
Our customers and the community rightly expect that we always do the right thing, but we have seen far too many instances of unacceptable customer outcomes. As the royal commission has shown, there have unfortunately been failures of judgment, failures of process, failures of leadership and, in some instances, greed.
We have been too slow to identify problems, too slow to fix underlying issues and too slow to put things right for customers. We became complacent. Our capability has been inadequate in critical areas, particularly operational risk and compliance. We have underinvested in prevention, even though we have invested significantly in customer remediation.
This is completely unacceptable.
Rowena Orr talks a little about the decision to call the chief executives of the big four banks. She says they were chosen because they play a “pivotal” role in the operation of the banking sector in Australia.
It is not possible to call executives from every entity that has been the subject of a case study ... as a result the commission will call a selection of executives from a selection of entities.
The big four were chosen because of their size and influence, she says.
These four institutions hold approximately three-quarters of the total assets held by authorised deposit taking institutions in Australia.
One way or another, the operation of these institutions affect the lives of most Australians.One way or another, the operation of these institutions affect the lives of most Australians.
Orr also acknowledges the critical role board members play in setting the strategic direction of the banks. To that end, we will hear from the chairs of CBA, NAB, and Bendigo and Adelaide Bank. The commission will also hear from the chairs of ASIC and APRA, the two regulators. Orr also acknowledges the critical role board members play in setting the strategic direction of the banks. To that end, we will hear from the chairs of CBA, NAB and Bendigo and Adelaide Bank. The commission will also hear from the chairs of Asic and Apra, the two regulators.
The purpose of calling these witnesses is not to go over old ground or seek more apologies or expressions of regret.The purpose of calling these witnesses is not to go over old ground or seek more apologies or expressions of regret.
That concludes Orr’s opening address. We will hear from CBA chief executive Matt Comyn shortly. That concludes Orr’s opening address. We will hear from CBA’s chief executive, Matt Comyn, shortly.
Orr makes one thing perfectly clear from the outset. We’re not here to hear more apologies from the banks. Some have already said sorry or given “expressions of regret”, she says. But this will do little to help the royal commission. Orr tells commissioner Kenneth Hayne: Rowena Orr makes one thing perfectly clear from the outset. We’re not here to hear more apologies from the banks. Some have already said sorry or given “expressions of regret”, she says. But this will do little to help the royal commission. Orr tells the commissioner, Kenneth Hayne:
The purpose of this round of hearings is not to hear further apologies or expressions of regret. We do not think that will assist you in fulfilling your task.The purpose of this round of hearings is not to hear further apologies or expressions of regret. We do not think that will assist you in fulfilling your task.
Instead, the final round of hearings will do two things:Instead, the final round of hearings will do two things:
1. Examine why misconduct in the banking sector occurred to such a significant degree. Orr says:1. Examine why misconduct in the banking sector occurred to such a significant degree. Orr says:
What caused the conduct that has been examined? Why did these things happen? Was it because of particular practices of financial service entities?What caused the conduct that has been examined? Why did these things happen? Was it because of particular practices of financial service entities?
Was it because of the culture of financial service entities or their governance practices?Was it because of the culture of financial service entities or their governance practices?
2. Find ways to stop it happening in the future. Orr outlines some questions that will be examined. Do we need new accountability structures for the banks, law changes, or changes to the practices of regulators? Do we need new mechanisms of oversight for financial service regulators? Are there barriers to the banks improving themselves? If so, how do we remove them? 2. Find ways to stop it happening in the future. Orr outlines some questions that will be examined. Do we need new accountability structures for the banks, law changes or changes to the practices of regulators? Do we need new mechanisms of oversight for financial service regulators? Are there barriers to the banks improving themselves? If so, how do we remove them?
And we’re off.And we’re off.
Senior counsel assisting, Rowena Orr, QC, is outlining the purpose of the current round of hearings to commissioner, Kenneth Hayne. The senior counsel assisting, Rowena Orr, QC, is outlining the purpose of the current round of hearings to the commissioner, Kenneth Hayne.
“Our focus is on understand why misconduct has occurred and what can be done to prevent further misconduct” “Our focus is on understand why misconduct has occurred and what can be done to prevent further misconduct.”
So, what can we expect from this round of hearings? The royal commission is hoping to delve into the root causes of misconduct. What caused the big banks and wealth management firms to, for example, charge fees for no service? Why did they fail to act when it came to their attention?So, what can we expect from this round of hearings? The royal commission is hoping to delve into the root causes of misconduct. What caused the big banks and wealth management firms to, for example, charge fees for no service? Why did they fail to act when it came to their attention?
To do this, the royal commission will examine “culture, governance, remuneration, and risk management practices” in Australia’s banking system. It will also probe the senior banking executives on possible responses to misconduct, including reforms to banking regulation.To do this, the royal commission will examine “culture, governance, remuneration, and risk management practices” in Australia’s banking system. It will also probe the senior banking executives on possible responses to misconduct, including reforms to banking regulation.
The royal commission also plans to examine the role of the regulators, both the Australian Securities and Investment Commission and Australian Prudential Regulatory Authority in “supervising the actions of financial services entities, deterring misconduct by those entities, and taking action when misconduct may have occurred”.The royal commission also plans to examine the role of the regulators, both the Australian Securities and Investment Commission and Australian Prudential Regulatory Authority in “supervising the actions of financial services entities, deterring misconduct by those entities, and taking action when misconduct may have occurred”.
Hello, and welcome to our live coverage of the banking royal commission’s last round of hearings.Hello, and welcome to our live coverage of the banking royal commission’s last round of hearings.
It’s set to be a blockbuster final fortnight. We’ll see the top brass from each of the big four banks front up to explain just how they allowed serious misconduct to flourish without consequence.It’s set to be a blockbuster final fortnight. We’ll see the top brass from each of the big four banks front up to explain just how they allowed serious misconduct to flourish without consequence.
First up, we’ll hear from the Commonwealth Bank chief executive, Matt Comyn, and the chairman, Catherine Livingstone. It’s set to be an uncomfortable hearing for the CBA leaders. They’ll be expected to explain what they’ve done to change banking culture and internal systems to ensure the kinds of flagrant abuses we’ve seen from the big banks are not repeated. First up, we’ll hear from the Commonwealth Bank’s chief executive, Matt Comyn, and the chairman, Catherine Livingstone. It’s set to be an uncomfortable hearing for the CBA leaders. They’ll be expected to explain what they’ve done to change culture and internal systems to ensure the kinds of flagrant abuses we’ve seen from the big banks are not repeated.
Stick with me as we watch the morning unfold.Stick with me as we watch the morning unfold.