NAB hid compo from ASIC to keep focus on earnings, commission told

NAB has been accused of keeping ASIC in the dark about extra compensation for ripped-off super clients.

NAB's Andrew Hagger leaves the royal commission yesterday. Picture: Aaron Francis

National Australia Bank has been accused of keeping the corporate regulator in the dark about tens of millions of dollars in extra compensation for ripped-off superannuation clients because the bank didn’t want to distract attention from its earnings results.

The allegations, aired during a torrid hearing yesterday at the financial services royal commission, could have serious con­sequences for the bank because misleading the Australian Securities & Investments Commission can be a crime. However, they were denied by the bank’s former head of wealth and current retail banking boss, Andrew Hagger.

Discussions of what to do about the looming release of an ASIC report detailing hundreds of millions of dollars in wrongly-charged fees by Australia’s largest banks went all the way to chief executive Andrew Thorburn, who was told that because ASIC would publish a lower number it had previously been given by the bank, NAB would emerge as “just one ‘in the pack’, rather than called out as an outlier”.

It also emerged that Mr Thorburn had raised concerns about the likely media response to the ASIC report.

Counsel assisting the commission, Michael Hodge QC, spent most of yesterday grilling Mr Hagger, who was served with notice to give evidence on Friday in a surprise move that means the inquiry has now spent five of the six sitting days so far in its current fortnight of hearings examining the affairs of NAB.

Mr Hodge has been probing the bank over fees it charged for services that were never received by super customers — a problem that, since it was discovered within NAB in 2015, has been at the centre of a long-running battle with ASIC that may itself lead to criminal prosecution.

Mr Hagger yesterday denied that in October 2016 there was a deliberate plot within the top ranks of NAB to keep information from ASIC so that it wouldn’t distract from its full-year financial results announcement or make the bank look bad in a forthcoming report by the regulator on the wider “fees for no service” scandal afflicting the financial services ­sector.

However, over four uncomfortable hours in the commission hot seat, the man sometimes regarded as a contender for the top job at NAB struggled to recall details and gave rambling answers that prompted Mr Hodge to accuse him of “saying a whole lot of other things — in order to try to justify your position — that are not an answer to a question”.

The commission heard that on the morning of October 24, 2016, Mr Hagger knew that NAB was planning to increase compensation over one particular fee, the “plan service fee”, from $12.4m to $34m.

This was because Mr Hagger was chairman of a NAB subsidiary, National Wealth Management Services, which at a board meeting that morning had passed a resolution promising the compensation and agreeing to indemnify the bank’ super trustee, NULIS, against the cost.

Mr Hagger spoke to ASIC commissioner Greg Tanzer by phone two hours after NWMS passed the resolution, but yesterday admitted he could not remember telling Mr Tanzer about the increased compensation and did not record doing so in a file note he made immediately after the conversation.

An internal file note, written by Mr Hagger, recorded that: “in the interests of openness and transparency we wanted to let (Mr Tanzer) know we are nearing completion of our position on PSFs with board meetings ocurrings for NWMS and NULIS”.

NULIS itself approved the compensation at a board meeting the following day.

Asked if he seriously thought NULIS might decide on less than full remediation for its super members, Mr Hagger said he did not want to “pre-empt the trustee board discussion”.

He said he opened the door “very wide” to questions from ASIC if it wanted to know more.

“I want to be absolutely clear on this,” Mr Hodge said.

“You regard the way that you dealt with ASIC as being open and transparent?”

“Yes, I do,” Mr Hagger responded.

Mr Hodge put it to Mr Hagger that “what you are doing when you speak with Mr Tanzer is giving him the impression that things are still up in the air and you will just have to wait and see what the boards resolve to do”.

“The way I would characterise is a little different to that,” Mr Hagger said.

“What I’m saying to him is that we’re nearing completion, the board meetings are happening this very week, and that it could potentially be included but I didn’t want to pre-empt the board discussions.”

Under heavy questioning from Mr Hodge over whether he told Mr Tanzer he had just stepped out of the still-running NWMS board meeting to make the phone call, Mr Hagger admitted: “No, I don’t think I did tell him that.”

ASIC released the fees-for-no-service report on Thursday, October 27, 2016 — the day NAB unveiled a bumper cash profit of $6.5bn, including a contribution from the wealth division of $356m.

Wealth earnings benefited from a 4 per cent fall in expenses, driven by “lower regulatory and compliance spend”, the bank said at the time.

In an email to wealth boss Paul Carter the following evening, Mr Hagger said: “When/how should we communicate with ASIC re (plan service fees)?”