CBA chief Matt Comyn first to face royal commission public flogging

CBA chief executive Matt Comyn has been forced to admit that bank bosses ignored managers’ warnings on compliance issues.

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

The first of the big bank chiefs to front a blistering round of questions at the Hayne royal commission was forced yesterday to admit the Commonwealth Bank’s top executives ignored ­multiple warnings from staff about poor customer products and escalating cultural problems.

CBA’s Matt Comyn, who took over the chief executive’s office in April as controversy engulfed the nation’s biggest bank, was yesterday backed into a corner several times as he took personal responsibility for a string of decisions but also implicated his former boss Ian Narev.

Mr Comyn conceded he had personally failed over several years to ensure the bank was meeting regulations in consumer credit insurance — including key changes in sales scripts — an area where CBA sold insurance products to 64,000 customers who didn’t need them.

“We should have and we did not,” Mr Comyn said of CBA’s failure to make changes in that business when he was leading the retail bank. “We should not be having to be asked by a regulator to improve some of those under­lying controls.”

But he also said he warned ­predecessor Mr Narev three times about the products and the trouble they had caused banks in Britain, but no action was taken.

“I raised the concerns, he had a differing view,” Mr Comyn said of his conversations with Mr Narev.

“There was generally indecision around that and I took that indecision to be the decision.”

Senior counsel assisting the commission, Rowena Orr QC, also peppered Mr Comyn with questions about why the bank did not heed earlier staff warnings on compliance and other risk-management processes.

During his time in the witness box, Mr Comyn revealed that CBA underinvested in its systems and ignored warnings from senior staff, including its group auditor and retail bank compliance manager. Several explosive staff letters were sent to him after he asked CBA’s top 500 managers to provide him with feedback after the prudential regulator lambasted the bank’s poor governance and risk framework. 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.

In her letter, CBA retail banking compliance manager Larissa Shafir 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 the community down. That had occurred “by not standing up to behaviours” she knew were not right.

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

Mr Comyn conceded there was not always a “sense of ­urgency” around risk protocols but said CBA was taking action, including bolstering numbers of compliance staff. Ms Orr hit back though, saying: “It’s not about more (compliance) people, it’s about listening to the people that you have.”

CBA chairman Catherine Livingstone is expected at the royal commission, possibly as early as today, with Westpac chief executive Brian Hartzer and Macquarie Group’s retiring chief Nicholas Moore scheduled in coming days.

Mr Comyn held firm on the issue of pay and bonuses, despite being ­reminded of the poor behaviour it could encourage. One example cited was where branch staff deposited their own money into children’s savings accounts to meet their financial targets and earn bonuses.

Mr Comyn said that while short-term bonuses could lead to “bad outcomes”, CBA considered it necessary to encourage “discretionary effort” by staff.

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

Outside the royal commission hearing in Sydney, CBA manager turned whistleblower Jeff Morris said the letters by senior bank staff to Mr Comyn included some by people who “didn’t listen” to his concerns and actively pushed for his ­removal.