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CBA admits to banking royal commission it put profit before customers – live CBA admits to banking royal commission it put profit before customers – live
(35 minutes later)
Orr describes the CBA’s dealings with ASIC over the mis-selling of consumer credit insurance as “problematic”. Back to culture. Orr just asked Comyn whether he thinks it will be “difficult to shift long-held mindsets within the CBA about how to deal with the regulator?”
Comyn replies: “that’s probably a generous description”. “It may prove to be,” he admits.
It came off the back of questioning about a recent case where the CBA took two months to tell Asic that the Financial Ombudsman Service had found “a systematic issue with CBA’s policies and procedures for providing information and general advice on loan protection products”.
“Was that acceptable?” Orr asks.
“Not at all.”
She asks whether he has an explanation for why it took so long.
I have an explanation but it’s not a good one. And that is ... the team that deals with FOS and specifically around individual customer matters or systematic matters, and this is one of the many reasons why it’s not a good one, are in different parts of the organisation.
He goes on until Orr interjects: “They didn’t talk to each other?”
“They didn’t talk to each other,” he agrees.
So we’re hearing about Comyn’s engagement with Asic chairman James Shipton. Comyn says the speak regularly, about “anything that’s on my mind”.
In one instance, Comyn called Shipton to make him aware of media reporting into the Youthsaver scandal.
Fairfax Media reported in May thousands of children’s CBA accounts were fraudulently set up by retail branch staff. It was part of a widespread scam to earn bonuses and meet aggressive performance targets.
Comyn says he called Shipton to give him fair warning.
“I would try not to surprise the regulator,” he says.
But, we now discover that although he told Shipton, the CBA did not make an official breach report within 10 business days, as required under the law.
Orr asks Comyn why the CBA didn’t report the breach.
“Because at that point in time we didn’t understand the significant of that particular matter,” he says.
“We hadn’t specifically turned out mind to whether it was a breach or a likely breach ... I agree that we should have more explicitly.”
But, Comyn still can’t say whether they’ve reported the breach.
Orr describes the CBA’s dealings with Asic over the mis-selling of consumer credit insurance as “problematic”.
Comyn replies: “That’s probably a generous description.”
“Do you accept that CBA wasn’t cooperative or constructive in its dealings with the regulator?” Orr asks.“Do you accept that CBA wasn’t cooperative or constructive in its dealings with the regulator?” Orr asks.
“Certainly not as cooperative or constructive as we should have been,” he replies.“Certainly not as cooperative or constructive as we should have been,” he replies.
Comyn the bank has been “arrogant” in its dealings with ASIC, and accepts the CBA had a history of poor engagement with the regulator in relation to the fees for no service and bad advice issues. Comyn says the bank has been “arrogant” in its dealings with Asic, and accepts the CBA had a history of poor engagement with the regulator in relation to the fees for no service and bad advice issues.
“We were narrow, legalistic, defensive and arrogant in our dealings with regulators and often we left it to our lawyers and compliance people in the organisation to deal with our regulators,” he said.“We were narrow, legalistic, defensive and arrogant in our dealings with regulators and often we left it to our lawyers and compliance people in the organisation to deal with our regulators,” he said.
OK, so, Orr is taking Comyn to that Ernst & Young report. The report was tasked with looking at whether the CBA had addressed Asic’s concerns about the sale of credit insurance products.OK, so, Orr is taking Comyn to that Ernst & Young report. The report was tasked with looking at whether the CBA had addressed Asic’s concerns about the sale of credit insurance products.
We’re told the report found the CBA sold consumer credit insurance to 933,535 customers in the last five years.We’re told the report found the CBA sold consumer credit insurance to 933,535 customers in the last five years.
Of those, approximately 227,845 were identified as being “higher risk of being affected” by some of Asic’s concerns with the product.Of those, approximately 227,845 were identified as being “higher risk of being affected” by some of Asic’s concerns with the product.
A further 444,000-odd customers were identified as at-risk, though with a lower risk profile.A further 444,000-odd customers were identified as at-risk, though with a lower risk profile.
These customers don’t include those who have already been identified as needing “remediation” and Orr wants to know whether the CBA expects it will need to extend its remediation program.These customers don’t include those who have already been identified as needing “remediation” and Orr wants to know whether the CBA expects it will need to extend its remediation program.
“If it’s necessary, yes,” he says.“If it’s necessary, yes,” he says.
“We certainly will consider these customers, yes, Ms Orr. I haven’t had the chance to discuss this report [but] of course we will consider EY’s findings.”“We certainly will consider these customers, yes, Ms Orr. I haven’t had the chance to discuss this report [but] of course we will consider EY’s findings.”
Orr suggests there is “clear potential” based on the Ernst & Young report that CBA will need to remediate “a significant amount of additional customers over and above those who are currently covered by your remediation programs?”Orr suggests there is “clear potential” based on the Ernst & Young report that CBA will need to remediate “a significant amount of additional customers over and above those who are currently covered by your remediation programs?”
“That’s a reasonable conclusion from reading that piece of paper, yes,” Comyn replies.“That’s a reasonable conclusion from reading that piece of paper, yes,” Comyn replies.
Comyn’s asked about the remediation to customers who were mis-sold CreditCard Plus insurance. It’s still not completed, and he admits the average time to remediate is “well in excess of a year”.Comyn’s asked about the remediation to customers who were mis-sold CreditCard Plus insurance. It’s still not completed, and he admits the average time to remediate is “well in excess of a year”.
“It’s completely unacceptable,” he says.“It’s completely unacceptable,” he says.
He said the company has focused on “precision, comprehensiveness” at the cost of timeliness.He said the company has focused on “precision, comprehensiveness” at the cost of timeliness.
“We had a general complacency and inability to be able to sufficiently prioritise,” he says.“We had a general complacency and inability to be able to sufficiently prioritise,” he says.
He says the bank is aiming to bring the timeline down to 90 days, but admits “we will have some difficulty”.He says the bank is aiming to bring the timeline down to 90 days, but admits “we will have some difficulty”.
We hear that the CBA expects to pay out about $15m to 64,000 customers over the sale of the CreditCard plus insurance.We hear that the CBA expects to pay out about $15m to 64,000 customers over the sale of the CreditCard plus insurance.
They’ve already paid about $10.5m of that.They’ve already paid about $10.5m of that.
In regard to loan protection products the bank expects to pay about $31m to 90,000 customers.In regard to loan protection products the bank expects to pay about $31m to 90,000 customers.
We’re told that Asic has been “expressing concerns” about the status of those remediations, and has asked the CBA to conduct a review of the sales of its consumer credit insurance.We’re told that Asic has been “expressing concerns” about the status of those remediations, and has asked the CBA to conduct a review of the sales of its consumer credit insurance.
Comyn says the CBA commissioned Ernst & Young to do that work.Comyn says the CBA commissioned Ernst & Young to do that work.
Orr is again pressing Comyn on the culture inside the CBA.Orr is again pressing Comyn on the culture inside the CBA.
“What, in your mind, is the single most important thing for you to do personally to change the culture within your organisation?” she asks.“What, in your mind, is the single most important thing for you to do personally to change the culture within your organisation?” she asks.
“The leaders inside the organisation,” Comyn says.“The leaders inside the organisation,” Comyn says.
“And do you feel that CBA has had the right leaders in the past?”“And do you feel that CBA has had the right leaders in the past?”
“No,” he says.“No,” he says.
“Do you feel that they have the right leaders now?”“Do you feel that they have the right leaders now?”
“We will see. I hope so. Yes.”“We will see. I hope so. Yes.”
Huh, interesting. Orr asks Comyn whether there have been other times in recent years where the CBA prioritised “financial objectives” over customers.Huh, interesting. Orr asks Comyn whether there have been other times in recent years where the CBA prioritised “financial objectives” over customers.
“Yes,” he replies.“Yes,” he replies.
“Can you give us some examples of that?” Orr asks.“Can you give us some examples of that?” Orr asks.
He can, in fact, give some examples.He can, in fact, give some examples.
“Fees for no service, in particular, would stand out. Less so essential super. Very different flawed thinking ultimately that supported that. AUSTRAC, I don’t believe was around commercial prioritisation or interest, not withstanding, of course, we could have invested and should have invested much more but that wasn’t the rationale of why we didn’t ultimately avoid failures ... the heart attack definition.”“Fees for no service, in particular, would stand out. Less so essential super. Very different flawed thinking ultimately that supported that. AUSTRAC, I don’t believe was around commercial prioritisation or interest, not withstanding, of course, we could have invested and should have invested much more but that wasn’t the rationale of why we didn’t ultimately avoid failures ... the heart attack definition.”
“Those are the examples you would give?” Orr asks.“Those are the examples you would give?” Orr asks.
“They’re examples. I am not suggesting they’re exhaustive.”“They’re examples. I am not suggesting they’re exhaustive.”
Orr brings him back to that reference to “the heart attack definition”.Orr brings him back to that reference to “the heart attack definition”.
“That last one you gave reliance on CommInsure of outdated medical conditions, you accept that was an example of CBA prioritising financial objectives over customer outcomes?” she asks.“That last one you gave reliance on CommInsure of outdated medical conditions, you accept that was an example of CBA prioritising financial objectives over customer outcomes?” she asks.
“Yes,” he replies.“Yes,” he replies.
“Because CommInsure failed to update the definition of heart attack in 2012, and again, in 2014 to accord with accepted medical definitions at those times?“Because CommInsure failed to update the definition of heart attack in 2012, and again, in 2014 to accord with accepted medical definitions at those times?
“Yes, that’s right.”“Yes, that’s right.”
“And there were financial objectives that led to and underpinned those decisions?”“And there were financial objectives that led to and underpinned those decisions?”
“Yes, that’s right.”“Yes, that’s right.”
You say in your statement that CommInsure failed to have sufficient regard to the interests of good customer outcomes?You say in your statement that CommInsure failed to have sufficient regard to the interests of good customer outcomes?
“Yes, that’s right.”“Yes, that’s right.”
We’re hearing a lot about Comyn’s attempts to convince Narev to quit the sale of so-called junk credit card insurance products, and the difficulty in the face of opposition from the bank’s wealth division.We’re hearing a lot about Comyn’s attempts to convince Narev to quit the sale of so-called junk credit card insurance products, and the difficulty in the face of opposition from the bank’s wealth division.
We’re told that in April 2016 Narev agreed to an internal review of the products, but it never went ahead. Later, Comyn suggested in an email that both he and the head of the wealth division mount arguments in an attempt to convince Narev of their position.We’re told that in April 2016 Narev agreed to an internal review of the products, but it never went ahead. Later, Comyn suggested in an email that both he and the head of the wealth division mount arguments in an attempt to convince Narev of their position.
But, he says, Narev never responded to his email.But, he says, Narev never responded to his email.
“Did you discuss these matters again?” Orr asks.“Did you discuss these matters again?” Orr asks.
“Not in as structured a way after this point in time, no. I think they continued to be a topic but I had ... in my view I couldn’t think of too many other options,” he says.“Not in as structured a way after this point in time, no. I think they continued to be a topic but I had ... in my view I couldn’t think of too many other options,” he says.
Orr asks if he “gave up”.Orr asks if he “gave up”.
“I wouldn’t say I gave up, but I was struggling to find another path,” Comyn replies.“I wouldn’t say I gave up, but I was struggling to find another path,” Comyn replies.
He says he was “insufficiently persuasive” in convincing Narev to drop the products.He says he was “insufficiently persuasive” in convincing Narev to drop the products.
Comyn admits there were “insufficient consequences” for employees at CBA who did not sell the consumer credit insurance appropriately.Comyn admits there were “insufficient consequences” for employees at CBA who did not sell the consumer credit insurance appropriately.
He said there had been “reductions to short-term variable awards”, but says he couldn’t recall anyone losing their job over the issue.He said there had been “reductions to short-term variable awards”, but says he couldn’t recall anyone losing their job over the issue.
Orr is asking Comyn to reflect on the impact of these decisions, the fact that it took two years to fix the problem, and what it says about the CBA’s culture.Orr is asking Comyn to reflect on the impact of these decisions, the fact that it took two years to fix the problem, and what it says about the CBA’s culture.
“Well, we dealt with this matter very poorly,” he says.“Well, we dealt with this matter very poorly,” he says.
We’re told that around April 2015 the CBA introduced a “knockout question” for in-branch and telephone sales of its CreditCard Plus insurance product. The point was to stop the sale of the product to ineligible customers.We’re told that around April 2015 the CBA introduced a “knockout question” for in-branch and telephone sales of its CreditCard Plus insurance product. The point was to stop the sale of the product to ineligible customers.
But the knockout question was not introduced for online sales of the product for another two years, until May 2017, which Comyn says was a mistake.But the knockout question was not introduced for online sales of the product for another two years, until May 2017, which Comyn says was a mistake.
“Well, I think the rationale at the time, which is clearly inadequate, was that the online channel was different and we were, again, overreliant on disclosure. It was a very poor decision,” he says.“Well, I think the rationale at the time, which is clearly inadequate, was that the online channel was different and we were, again, overreliant on disclosure. It was a very poor decision,” he says.
The commissioner, Kenneth Hayne, asks what he means by that.The commissioner, Kenneth Hayne, asks what he means by that.
“I think the assumption at the time, commissioner, was the channel was quite different and, therefore, customers would read the disclosure and the information that was available to them online,” Comyn says.“I think the assumption at the time, commissioner, was the channel was quite different and, therefore, customers would read the disclosure and the information that was available to them online,” Comyn says.
He said that was “clearly not the case for the majority of customers”.He said that was “clearly not the case for the majority of customers”.
“It was a very poor decision,” Comyn says.“It was a very poor decision,” Comyn says.
We’re told the CBA didn’t introduce any knockout question into the sale of any other consumer credit card insurance at the time either. Comyn says the decision was “flawed”. He says the knockout questions should have been introduced more widely back in 2015.We’re told the CBA didn’t introduce any knockout question into the sale of any other consumer credit card insurance at the time either. Comyn says the decision was “flawed”. He says the knockout questions should have been introduced more widely back in 2015.
We’re now taken Comyn’s notes of a meeting between he, Narev and, weirdly, grand chess master Garry Kasparov.We’re now taken Comyn’s notes of a meeting between he, Narev and, weirdly, grand chess master Garry Kasparov.
Comyn says Kasparov attended a client meting. He was a fascinating dinner guest, we’re told.Comyn says Kasparov attended a client meting. He was a fascinating dinner guest, we’re told.
According to Comyn’s notes of the meeting, Narev gave him feedback to “temper your sense of justice”.According to Comyn’s notes of the meeting, Narev gave him feedback to “temper your sense of justice”.
Comyn tells Orr he took this to mean he needed to “calm down” and “focus more on my personal conviction”, “better manage competing agendas” and “to pick which battles”.Comyn tells Orr he took this to mean he needed to “calm down” and “focus more on my personal conviction”, “better manage competing agendas” and “to pick which battles”.
OK, so things have picked up pretty much where they left off yesterday.OK, so things have picked up pretty much where they left off yesterday.
Counsel assisting Rowena Orr is asking Comyn about the CBA’s sale of junk credit card insurance, and his advice to the bank’s former chief executive, Ian Narev, to cease the sale of the products.Counsel assisting Rowena Orr is asking Comyn about the CBA’s sale of junk credit card insurance, and his advice to the bank’s former chief executive, Ian Narev, to cease the sale of the products.
Comyn says he had a “robust discussion” with Narev over the products, but that he did not take up his recommendation to suspend the sale of the junk products. They had three other meetings in April, May and June 2016 to discuss this topic, but the recommendation wasn’t taken up.Comyn says he had a “robust discussion” with Narev over the products, but that he did not take up his recommendation to suspend the sale of the junk products. They had three other meetings in April, May and June 2016 to discuss this topic, but the recommendation wasn’t taken up.
He said he believed Narev was getting “different views from a different part of the organisation” and took the view the CBA product was deficient compared with other similar products in the market.He said he believed Narev was getting “different views from a different part of the organisation” and took the view the CBA product was deficient compared with other similar products in the market.
Good morning! Welcome to our live coverage of the final week of the banking royal commission. I’ll be taking you through today’s hearing. We expect to hear from we’ll hear more from the Commonwealth Bank’s chief executive, Matt Comyn, as well the chairwoman, Catherine Livingstone.Good morning! Welcome to our live coverage of the final week of the banking royal commission. I’ll be taking you through today’s hearing. We expect to hear from we’ll hear more from the Commonwealth Bank’s chief executive, Matt Comyn, as well the chairwoman, Catherine Livingstone.
First though, here’s a quick wrap of what we learned on what turned out to be quite an eventful Monday:First though, here’s a quick wrap of what we learned on what turned out to be quite an eventful Monday:
Comyn admitted there was little, if any, ongoing service provided by mortgage brokers to customers, despite them charging trail commissions.Comyn admitted there was little, if any, ongoing service provided by mortgage brokers to customers, despite them charging trail commissions.
CBA balked at removing perverse incentives for mortgage brokers to sell larger loans. The bank had come extremely close to introducing a flat-fee model for brokers, instead of commissions. This would have delinked payments to brokers from the size of the loans. CBA was a week out from announcing the change in 2017. But it suddenly decided that it couldn’t make the change without being certain the rest of the industry would follow suit.CBA balked at removing perverse incentives for mortgage brokers to sell larger loans. The bank had come extremely close to introducing a flat-fee model for brokers, instead of commissions. This would have delinked payments to brokers from the size of the loans. CBA was a week out from announcing the change in 2017. But it suddenly decided that it couldn’t make the change without being certain the rest of the industry would follow suit.
Much of the morning session yesterday was devoted to the role bonuses played in misconduct. Comyn said he had considered removing bonuses, but decided against it. He said such a move would have significant impacts on parts of the business, particularly in home lending. Comyn said they were necessary to “uncover the unserved financial needs of our customers and ensure we always provide good customer outcomes”.Much of the morning session yesterday was devoted to the role bonuses played in misconduct. Comyn said he had considered removing bonuses, but decided against it. He said such a move would have significant impacts on parts of the business, particularly in home lending. Comyn said they were necessary to “uncover the unserved financial needs of our customers and ensure we always provide good customer outcomes”.
The inquiry heard CBA removed bonuses for its teller staff last year. The change had no impact on their performance.The inquiry heard CBA removed bonuses for its teller staff last year. The change had no impact on their performance.