CBA ignored ASIC after regulator raised the scrapping of banker bonus cap with board and CEO

Documents show ASIC repeatedly raised CBA’s move to scrap its banker bonus cap in meetings with the bank’s board and CEO, Matt Comyn.

Commonwealth Bank chief executive Matt Comyn.

Commonwealth Bank ignored the corporate regulator’s attempts to stop it scrapping its banker bonus cap, after revealing “Project Lily” in July last year, documents released under Freedom of Information show.

Four documents released by the Australian Securities and Investments Commission reveal the regulator directly raised the matter with CBA’s chief executive and board, taking the bank to task over plans to drop the cap just weeks before the “original go-live date”.

A briefing paper released by ASIC reveals its senior staff were warned CBA was looking to dump its bonus cap, which limits remuneration at 50 per cent of base pay, in mid-2023.

These limits were imposed after the 2017 Stephen Sedgwick-led Australian Banking Association review.

CBA in April aggressively ramped up its bonus caps to up to 80 per cent of base pay, as it sought to fight off intense competition from big bank rivals, mortgage brokers and maverick Macquarie.

The briefings show ASIC put its staff on alert in April over the change, after several high-level meetings with CBA senior leadership failed to stop the bank dumping its bonus cap.

The heavily redacted paper, released to The Australian, shows ASIC’s steering committee was alerted to CBA’s plans in July last year, with the regulator noting the bank had warned it was making the move “to prevent further loss of their high-performing proprietary home lending staff” to the mortgage broker sector, which did not face a variable remuneration cap.

The four documents, which ASIC claims contains “contains details and discussions of methods used in ASIC’s investigations into breaches or possible breaches of the law”, reveal the regulator failed to stop CBA dumping the limits despite raising the matter directly with the bank’s board.

CBA CEO Matt Comyn, left, with chairman Paul O'Malley.

A CBA CEO briefing document, from October, supplied to ASIC, noted that it warned ASIC it was moving to dump the caps under a scheme called Project Lily, acknowledging it was “contrary to the Sedgwick review”.

“ASIC is concerned that the changes could increase the risk of mis-selling and poor customer outcomes and could initiate a broader industry trend away from the Sedgwick recommendations,” the document said.

“ASIC was also disappointed that CBA failed to inform ASIC of these proposed changes until a few weeks prior to their original go-live date.”

A third briefing paper, detailing an ASIC meeting with CBA chair Paul O’Malley and CEO Matt Comyn, shows the bank updated the regulator on Project Lily, as part of a larger meeting. The heavily redacted document shows ASIC repeated its concerns over CBA’s move, warning it was a “retrograde step”.

ASIC also demanded CBA reveal if it had engaged with the ABA over its decision.

An internal ASIC briefing said it decided in an April meeting it would put its staff on alert over CBA’s move, and the commission would “monitor for complaints and be vigilant for emerging conduct issues”.

A letter from ASIC senior lawyer Haydar Tuncer said CBA “objected to the disclosure of this material”, and the bank was concerned its disclosure would have a “detrimental effect” on its business.

“Rather than being motivated to be fulsome when dealing with ASIC, regulated entities may be inclined to provide only the essential information for fear of any broader information later being released,” Mr Tuncer said.

“This then has a knock-on effect of making it more difficult for ASIC to be fully informed and … able to act appropriately.”

Chair Joe Longo told a parliamentary joint committee in April ASIC had “made it very clear” to CBA it found its move “very disturbing, very disappointing”.

Originally published as CBA ignored ASIC after regulator raised the scrapping of banker bonus cap with board and CEO