NAB chief admits fee-for-no-service scandal ‘abolutely wrong’ amid claims bank had no purpose in recent years

National Australia Bank chief Andrew Thorburn says the bank was not being “dishonest” but admitted its fault when it took fees but did not offer customer service, amid a startling challenge about the bank’s lack of purpose.

National Australia Bank CEO Andrew Thorburn arrives at the Royal Commission. Picture: AAP

National Australia Bank chief Andrew Thorburn says the bank was not being “dishonest” when it took fees but did not offer customers service, the finance royal commission heard.

Facing the finance royal commission at its hearings in Melbourne, Mr Thorburn said the incident, in which customers were transferred to wealth manager MLC and charged a fee despite not getting advice, was wrong but would not label it dishonest.

“It’s wrong, it’s absolutely wrong,” he said.

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Mr Thorburn said he was working towards a greater sense of purpose at the company. Picture: AAP

Mr Thorburn said in this case it was driven by systems and processes breaking down, not people purposefully breaking rules.

“Dishonest would go to intent, and I don’t think it was dishonest in that respect.”

Counsel assisting the commission Michael Hodge QC asked if someone was dishonest if they did not care if they provided service and had no systems to check.

“That’s not dishonesty that’s just professional negligence,” Mr Thorburn said.

He said some processes failed.

“We certainly didn’t have the right checks and balances in that process,” he said.

“I agree with that, but I’m not ... agreeing ... that we knew what we were doing and that it was dishonest.”

As a part of the fee-for-no-service scandal, NAB has also acknowledged charging advice fees to superannuation customers after they died.

The bank was also warned by the corporate cop that NAB’s attempts to pay customers back were “out of step” with other banks that had the same problem.

Mr Hodge asked if made him worry him about his banks ethics.

“I don’t think you can draw that conclusion ... I don’t think we were wanting to be unethical,” Mr Thorburn said.

Mr Thorburn also revealed he handed responsibility for handling of the fee for no service scandal to his chief legal officer Sharon Cooke in charge after he met Australian Securities and Investments Commission chief James Shipton in April.

NAB ‘NEVER HAD A PURPOSE’

Earlier, Mr Thorburn said his bank “never had a purpose” in recent years, which led it from long-term thinking.

Mr Hodge asked Mr Thorburn about the bank’s recently adopted strategy of having a sense of “purpose over 50 years and vision over five years”.

Mr Hodge asked if the bank had always had a vision and purpose.

“Well, in the last two years the purpose and vision have been … we never had a purpose,” Mr Thorburn said.

Mr Hodge shot back with: “Presumably your purpose is to be a bank?”

“Your purpose would be to take deposits and lend money and to do that as well as you could, is that over simplifying,” the counsel assisting said.

But Mr Thorburn said he and chairman Ken Henry had worked towards crafting a bigger sense of purpose at the company in recent years, which would guide those day to day functions of the bank.

“And I think it was very thorough and very disciplined,” the bank chief said, adding it was about what the bank “stands for”.

Mr Thorburn also said variable pay and bonuses had gone higher in recent years as banks had competed for the best people in the “global talent pool”.

The NAB chief attributed one of the big changes that led to problems at lenders was the move from base pay to greater “incentive” pay.

Mr Thorburn said in recent years many people in the banking sector ended up on variable awards based on short term considerations.

He also said banks were becoming more complex partly due to regulation and compliance obligations.

“Presumably your purpose is to be a bank?”, Mr Thorburn was asked. Picture: Hollie Adams

Mr Thorburn said banks still needed the ability reward bankers who “over achieve” and can earn more than others who perform less well.

But he acknowledged that there had been problems with aspects of NAB’s pay schemes.

“I think we’ve had the wrong incentive schemes,” he said.

“Take the ‘Introducer’ scheme … I am sure you are coming to it.”

NAB’s introducer scheme saw people in other professions paid to supply mortgage lending leads.

It led to gym and hairdressers offering tips and an alleged fraud ring developing around it in some branches in western Sydney.

Mr Thorburn also blamed a “world that has grown faster” for problems, pointing out that when people ordered an Uber they wanted it straight away.

“You know, people communicate via Snapchat,” the banker said.

Mr Hodge contested the point, saying there weren’t many Millennials on the NAB executive team.

“But many of our customers are (Millenials),” Mr Thorburn said.

The banker said the expectations on banks and companies being able to adopt new products quickly had been “heightened”.

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