Banking royal commission: Commonwealth Bank ignored warnings by own staff

Matt Comyn admitted a lack of urgency as the Hayne inquiry heard executives failed to heed complaints by CBA staff.

Commonwealth Bank CEO Matt Comyn arrives at the banking royal commission hearings in Sydney. Pic: AAP

Commonwealth Bank executives ignored warnings from senior staff, including its group auditor and retail bank compliance manager, about failings in risk management and processes, the Hayne royal commission has heard.

The revelations came as the final and seventh round – which is delving into policy and prevention – began in Sydney with scandal-prone CBA is in the spotlight.

Chief executive Matt Comyn faced intense questioning from senior counsel assisting the commission Rowena Orr QC, starting with several explosive staff letters sent to him around the bank’s compliance shortcomings.

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A scathing review of CBA culture by the Australian Prudential Regulation Authority earlier this year found it guilty of complacency and said profitability had dulled its senses to signs of risk.

In a series of emailed letters to Mr Comyn, senior staff made clear that many of the concerns raised by the prudential regulator about the bank were grievances they had already tried to communicate.

“Frankly there is not much in the APRA report that audit has not said before, but perhaps we need to improve in the area of articulating our views,” CBA auditor Mark Worthington said in his letter.

Mr Comyn had asked his top leaders and managers to speak to employees and respond to them directly on their concerns.

CBA’s retail banking compliance manager Larissa Shafir’s letter said she was “vindicated and relieved” by APRA’s conclusions, noting they reflected what her team had raised for “some time”.

She said APRA’s report was an “accurate reflection” of problems within the risk and compliance area.

Marianne Perkovic, who fronted the commission in round two in her capacity as CBA’s former wealth management boss, also made candid admissions in her letter to Mr Comyn.

She said while she “put my brand and reputation on the line for CBA” she felt she had let customers and community down. That had occurred “by not standing up to behaviours” she knew were not right, Ms Perkovic’s letter said.

It added that CBA had relied “too much” on legal and financial advisers and consultants, while not paying enough attention to customers.

Matt Comyn was peppered by questions from counsel assisting Rowena Orr.

Mr Comyn conceded there was not always a “sense of urgency” around risk protocols but said CBA was taking action on APRA’s findings, including bolstering numbers of compliance staff.

Ms Orr hit back, saying: “It’s not about more (compliance) people, it’s about listening to the people that you have.”

She also peppered Mr Comyn with questions on remuneration at the bank and how it could create perverse outcomes.

One example cited was where branch staff deposited their own money into Dollarmites and Youth Saver children’s savings accounts to meet their financial targets and earn a bonus.

While Mr Comyn admitted that short term bonuses could lead to “bad outcomes”, he said the bank earlier considered it was necessary to encourage “discretionary effort” by staff.

“I am certainly shifting,” Mr Comyn said, of whether he was open to scrapping incentives for front line branch staff.

He also maintained that ending bonus payments in areas like residential lending had created problems in the UK, with mortgage brokers lifting their market share by 20 per cent to 75 per cent of new loans.

“I would be conscious of an even playing field,” he said, noting that it would be difficult to retain lending managers and employees if bonuses were scrapped ,as many would move to broking.

In her opening statement, Ms Orr said this round of final hearings was largely framed around what could be done to prevent future misconduct.

Due up next is CBA chairman Catherine Livingstone, with Westpac CEO Brian Hartzer and Macquarie Group’s retiring chief Nicholas Moore scheduled in coming days.