Australian regulator announces inquiry into Commonwealth Bank

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The Australian Prudential Regulation Authority (APRA) said it is to launch an “independent prudential inquiry” into the Commonwealth Bank of Australia, which it said would focus on governance, culture and accountability frameworks and practices within the bank, Australia’s largest. 

APRA chairman Wayne Byres said the decision to initiate a prudential inquiry followed a number of issues that had raised concerns about the bank’s culture and governance, and had damaged the bank’s reputation and public standing.

In a statement, the APRA said the inquiry would be conducted by an independent panel that it would appoint, and that it was anticipated a final report on the matter, which would be made public, would be delivered to the authority around six months after it is formally begun.

Earlier this month,  the Australian federal government’s financial intelligence agency, AUSTRAC, announced that it was initiating “civil penalty proceedings” in Australia’s federal court against the CBA for what it said had been “serious and systemic non-compliance” with the anti-money-laundering regulations.

“The Australian community’s trust in the banking system has been damaged in recent years, and CBA in particular has been negatively impacted by a number of issues that have affected the reputation of the bank,” said APRA chair Wayne Byres (pictured left).

“Given its position in the Australian financial system, it is critical that community trust is strengthened,” he added.

As well as being sued over its failure properly to act against drug and terrorism funding and money laundering, as reported, the bank has been involved in a number of widely publicised scandals, including being obliged to pay more than A$100m in compensation to clients for providing poor or non-existent financial advice for which they were billed.

When the announcement of Austrac’s court action against CBA broke on 7 August, CBA chief executive Ian Narev ruled out standing aside. Just a week later, however, CBA chair Catherine Livingstone announced that he will leave the bank by 1 July 2018, declining to say whether he had offered his resignation or had been sacked.

“The overarching goal of the prudential inquiry is to identify any core organisational and cultural drivers at the heart of these issues and to provide the community with confidence that any shortcomings identified are promptly and adequately addressed,” said Byres.

“CBA is a well-capitalised and financially sound institution. However, beyond financial measures, it is also critical to the long-run health of the financial system that the Australian community has a high degree of confidence that banks and other financial institutions are well governed and prudently managed,” Byres added.

The inquiry is expected to last for six months and is to be funded by the bank itself.

“We are confident that our 50,000 people come to work each day to give their best, for the benefit of our customers,” said Narev. “At the same time, we know that our mistakes have hurt our reputation.”