Commonwealth Bank and NAB executives were in the dark about misconduct: Hayne report

Commonwealth Bank and NAB executives were largely in the dark over their misdeeds, according to Hayne report.

A CBA ATM. Picture: Nikki Short

Commonwealth Bank and National Australia Bank executives were largely in the dark over their misdeeds, the royal commission has found, leaving bank chiefs under the impression that any misconduct was perpetrated by rogue employees or bad apples acting independently.

Commissioner Kenneth Hayne noted the inability of the major banks to understand the dramatic level of their own misconduct, describing the actions that the banks took after he asked for initial submissions of wrongdoing over the last decade.

While the royal commission probed 61 institutions from the banking, insurance and superannuation industries, the major financial institutions — ANZ, CBA National Australia Bank and Westpac and AMP — failed to properly respond to Mr Hayne’s request.

After receiving, in cases, only examples of conduct the banks had identified in its submission, Mr Hayne launched a second request for information, asking for detailed and comprehensive list of all conduct in the last five years that amounted to misconduct.

“CBA and NAB protested that the task was too large and could not be completed within the time allowed,” Mr Hayne said. Both banks then proceeded to submit large print outs of “unhelpful” documents detailing information of every incident workers committed that may be a breach of the law.

Keep up with evolving highlights from the report via our live blog

CBA then submitted further tables of misconduct, with the admissions separated between its mortgage broking subsidiary Aussie Home Loans and the rest of the CBA business. NAB was forced to separately examine all its significant litigation reports through Australian court judgements, its breach registers, its reports to ASIC, APRA and the anti-money laundering regulator, the Financial Ombudsman Service, its annual statements of compliance and details handed over to the Australian Information Commissioner.

“The point to be made about the course of events is that at least CBA and NAB found it difficult to comply with the requests that I made,” Mr Hayne said. “Taken together, the course of events and the explanations proffered can lead only to the conclusion that neither CBA nor NAB could readily identify how, or to what extent, the entity as a whole was failing to comply with the law.”

“And if that is right, neither the senior management nor the board of the entity could be given any single coherent picture of the nature or extent of failures of compliance; they could be given only a disjointed series of bits of information framed by reference to particular events,” he said.

“Information presented in that way points too easily towards explaining what has happened as ‘a small number of people choosing to behave unethically’ or as the product of ‘people, policies and processes that existed with a pocket of poor culture in that area at that time’. The extent to which these issues extend beyond CBA and NAB remains to be explored.”