CBA’s Narev concedes inappropriate advice

Ian Narev has defended the bank’s interest rates and charges as he fronted wide-ranging questioning.

Commonwealth Bank boss Ian Narev concedes an independent review found that one in 10 customers received inappropriate financial advice from the bank.

Mr Narev on Tuesday was quizzed by a federal parliamentary committee about the bank’s ongoing review of the scandal in its financial planning arm several years ago which led to the banning of some of its advisers.

He told MPs an independent report last week found of 8000 customers who asked for their financial advice to be reviewed, 6000 had been completed. It found more than 10 per cent of those were given inappropriate advice. The bank had paid out $11 million in claims since its initial payout of $52 million several years ago.

Mr Narev defended the time it had taken to resolve the matter and said it would be wrapped up by the end of the year.

“We’ve gone back a large number of years in this program to statements of advice that go back prior to the global financial crisis,” he said. “So yes it has taken a period of time to do that but we’ve done it thoroughly, with independent oversight.”

The House of Representatives economics committee will seek documents on the bank’s internal investigation of the scandal as well as details on action taken by the bank to address it.

The banking industry has been hit with a string of financial scandals in the past decade or so, fleecing mum and dad investors of millions of dollars. Mr Narev said the vast majority of his bank’s people come to work each day to do their best for customers.

“The culture that they collectively create is one that emphasises our values, and that strives to ensure that CBA is strong and fair,” he told the hearing at Parliament House in Canberra.

“But we also know we need to do better. We understand that fairness means ensuring that high levels of customer satisfaction are uniform levels of customer satisfaction.”

Mr Narev said he had met with customers with experiences of being let down by the bank.

“I’ve done so in order to understand their experiences first hand,” he said. “I’ve said before how sorry I am for the pain that we’ve caused them. I say so again today.” The decision to establish the parliamentary review came after the banks failed to pass on in full to borrowers the Reserve Bank’s August interest rate cut. Instead, the big four banks offered higher term deposit rates as part of their response.

However, committee chairman Liberal MP David Coleman pointed out CBA had subsequently already cut its deposit rates since August.

Mr Narev said the bank never intended the repriced deposit rates would continue indefinitely when it made the announcement.

“A lot of customers have taken the opportunity to get higher rates which, as you will be aware, because of the nature of the product, they will continue to get for the period that they invested in the term deposit,” he said.

Mr Narev was asked why the cash advance rate on the bank’s low rate card was more than 21 per cent, when the official cash rate is just 1.5 per cent. “To me, that’s gouging, that’s excessive,” coalition backbencher Scott Buchholz said.

“It is a highly profitable part of the business, how is that fair?” Mr Narev said he understood the concerns but argued the bank did not encourage its customers to take on high amounts of high-risk debt.

The bank was balancing the needs of customers and shareholders when it made decisions on rates, he said.

He conceded there were some products “which could probably be a bit more cheap”. “I don’t think there’s any product under which I could sit here in good conscience and tell you we’ve made the absolute perfect balancing decision,” he said.

“What we can’t do or shouldn’t do as a bank ... is cut rates significantly only then to have to jack them up very significantly when as is always the case in economic cycles, things go a different way,” he said.

Mr Buchholz asked Mr Narev whether he’d consider lowering credit card rates, given he told the committee he was willing to listen to suggestions. Two or three per cent would be a good start, he said.

“I said we came in here with a spirit of openness and listen to suggestions and we will,” Mr Narev replied.

AAP/ Dow Jones