NAB’s Andrew Thorburn defends loan introducer scheme

NAB CEO Andrew Thorburn has backed the controversial mortgage introducer program and staff bonuses.

NAB CEO Andrew Thorburn leaves the banking royal commission in Melbourne. Picture: David Geraghty

National Australia Bank chief executive Andrew Thorburn has backed the lender’s controversial mortgage introducer program and said staff bonuses should be retained to keep the sector competitive.

Under questioning at the Hayne royal commission yesterday, Mr Thorburn admitted the introducer program had encouraged bad behaviour, but said NAB had implemented changes to rectify the shortfalls.

“We put the bait right there … they stepped over the line,” he said of the payments made to those that introduced loan customers to the bank. The program was affected by fraud and cash bribes as businesses and individuals looked to game the system.

“It’s a watching brief,” Mr Thorburn said. “I feel confident we’ve gone through some very sensible steps to this point.

“It is a benefit to the customer for convenience and speed and confidence in seeing somebody who is endorsed by somebody that they respect.”

Senior counsel assisting Michael Hodge QC suggested the introducer program “corrupts” the professional relationship between an adviser and their client.

Meanwhile, incentives and bonus payments were again a key topic of questioning after Commonwealth Bank chief executive Matt Comyn, Westpac chief Brian Hartzer and Macquarie Group chief Nicholas Moore were ­quizzed on it last week.

Like his rivals, Mr Thorburn said there was still a role for variable pay at banks.

“I would have concerns about abolishing it … it would make our sector less competitive,” he added.

In a heated exchange on the topic of NAB changing fees for no service, commissioner Kenneth Hayne asked Mr Thorburn if he thought the fees “accidentally fell into the pocket of NAB?”

Mr Thorburn relied by saying: “Well, I can’t disagree with that commissioner.”

Mr Thorburn said both problems were the result of “ineffective process design”.

However, he denied that charging fees for no service was dishonest, saying instead that it was “wrong”.

“It’s absolutely wrong. I think dishonesty goes to intent. I don’t think I’ve seen in this case and others where there wasn’t an intention to not do the right thing or maybe an intention for it to be a problem from the start and someone to ignore it.”

Mr Thorburn told the commission the fact that the other major banks were compensating customers to a standard acceptable to the corporate regulator, the Australian Securities & Investments Commission, did not bring up any questions about the ethical culture at NAB.

When asked by Mr Hodge whether NAB’s early move away from pure commissions to ongoing fee arrangements was somehow used as a justification for its approach to compensating customers, with NAB taking the view that it had already dealt with the issue.

Mr Thorburn agreed it was not appropriate justification, saying a meeting with ASIC commissioner James Shipton made his view clearer.

“He made it very clear to me that things in this respect were not good and that they had been very disappointed with the legal, technical way that we had been dealing with this matter,” Mr Thorburn told the royal commission.