Banking royal commission: Kenneth Hayne questions banks’ obedience to law

Royal commissioner Ken Hayne has warned an NAB witness that the inquiry might have to examine breaches of the law.

Counsel assisting the financial services royal commission, Rowena Orr, addresses a hearing. Pic: Pool.

Banking royal commissioner Kenneth Hayne has questioned the attitude of the financial services industry to obedience to the law.

Acknowledging that the industry was large and things were bound to go wrong from time to time, Mr Hayne went on to say:

‘“One thing I might have to look at is what is the attitude of the industry … to obedience to the law.

“Obedience to the law that governs their affairs.

“There may be a difference between a breakdown in controls and an acknowledgment of a breach of laws.

“I don’t want people ignoring the fact that these are ideas at least on the table.”

The comments came after counsel assisting the financial services royal commission, Rowena Orr, QC, earlier blasted Australia’s biggest bank, the Commonwealth Bank, for swamping the inquiry with spreadsheets rather than coming clean about misconduct over the past 10 years.

Ms Orr also slammed NAB for its submission, which she said “did not grapple” with commissioner Kenneth Hayne’s request for a full confession of misconduct and conduct falling short of community standards and expectations.

Westpac last night also admitted it still needed to provide more information, she said.

Ms Orr this morning opened the commission’s first full public hearing by running through the main issues to be examined in the coming fortnight — home loans, car loans, credit cards, add-on insurance, overdrafts and account administration errors.

She said CBA’s first submission to the royal commission was at a “high level” and failed to disclose the full extent of misconduct or conduct that fell below community expectations, “as a number of other entities had done”.

A second submission last month was “not in a form that made it possible to understand the scale” of CBA’s issues, she said.

It contained “a large volume of spreadsheets containing ‘all details of compliance incidents’ that had been lodged since 1 January 2013”.

However, these “compliance incidents” included potential problems as well as actual ones, she said.

Ms Orr also took aim at CBA for including just eight paragraphs about problems at its mortgage broker, Aussie Home Loans, in its submission.

“Aussie acknowledged no misconduct in the past 10 years,” she said.

However, in response to a second request for information the CBA produced a spreadsheet outlining misconduct by Aussie over the past five years, including seven events of irresponsible lending and eight incidents relating to homeloans “including falsification of documents”.

Ms Orr said that since 2010, the banks have had to pay back almost $730m to compensate customers hurt by misconduct or shoddy behaviour in consumer credit areas including home loans, credit cards and car loans.

The NAB’s network of mortgage introducers, who bring potential home loan borrowers to the bank in return for a commission, is to be the first area probed by the inquiry.

This prompted a pre-emptive apology from NAB chief executive Andrew Thorburn, who in a statement issued half an hour before the commission opened said that “the focus of the royal commission will again demonstrate that what occurred is regrettable and unacceptable”.

We haven’t always done right by our customers, NAB boss Andrew Thorburn has admitted. Pic: Hollie Adams

In an open letter to customers and employees, Mr Thorburn said: “As we’ve responded to the royal commission’s requests for information over the last few months, it’s an important and confronting reflection point for us that there have been times in the past where we have not done the right thing for our customers,” he said.

“While many of these issues are public, we must continue to take action to strengthen our systems and processes so they don’t happen again.

“The simple fact is that none of these issues are acceptable.

“They should not have happened in the first place, and they show that we haven’t always done right by our customers or treated the community with respect.

“This is not good enough.”