Commonwealth Bank says sorry, pledges culture fix after scathing report

Commonwealth Bank will order 500 executives to read a scathing report on the bank’s culture and come up with ways to fix it.

Commonwealth Bank chair Catherine Livingstone with CEO Matt Comyn in Sydney following the release of the APRA report. Pic: AAP

Commonwealth Bank chairman Catherine Livingstone and new chief executive Matt Comyn have apologised for numerous failings exposed in a scathing report to the Australian Prudential Regulation Authority and said its recommendations would be implemented in full.

Ms Livingstone said the report would have consequences for executive remuneration at CBA.

But Mr Comyn would not confirm an expectation by Treasurer Scott Morrison that more heads would roll at the bank, saying a number of executives had already left since last year’s exposure of Austrac money-laundering allegations, which that prompted the ordering of APRA report.

Ms Livingstone said the report was “both upfront and confronting” about the ways the bank had failed its customers and weakened trust in the organisation, and provided a clear road map to fix it.

“We are committed to implementing in full the recommendations of the APRA report and the board and management are now undertaking a comprehensive response,” Ms Livingstone told journalists.

Mr Comyn said the reports were consistent with his own thoughts on what had “gone wrong” at CBA.

“We have become complacent, we allow good intent and collegiality to matter more than accountability and follow through,” he said.

“Our capabilities in risk and compliance simply weren’t good enough and we didn’t listen hard enough to our unhappiest customers and therefore missed the deeper root causes.”

Mr Comyn said he planned to make 500 copies of the report for senior leaders at the bank and would single out specific criticisms before asking them to read the report and consider what could be done to fix it.

“Some of our leaders may think the report is unfair, some will think it describes CBA and other people, but not them and their teams,” Mr Comyn said.

“I will make it clear that this report describes the bank, it describes me and it describes every one of us.

“I will ask each of them to reflect on the report and what they need to do differently as a result, and for each of our teams to share those reflections.”

Mr Comyn said he had volunteered to forgo a short term bonus of up to $2.2 million this financial year as a mark of accountability for fixing the problems identified in the report.

It follows the release this morning of a damning APRA report on the bank’s culture which found CBA was complacent and that its sustained financial success had “dulled its senses” to signals that might have otherwise alerted the board and senior executives to problems emerging inside the banks, as well as a deterioration in CBA’s risk profile.

CBA will enter into an enforceable undertaking to conduct remedial action following the APRA inquiry and be required to carry $1 billion in extra capital, which will drag on returns at Australia’s biggest and most consistently profitable bank.

Treasurer Scott Morrison labelled the report “damning” and a “wake-up call” to every company board member in the country, but he also expected CBA board members to resign.

“A number of board members and executives have already gone,” he said. “My understanding is there will be others who will be leaving and that’s what I expect to happen.”

Ms Livingstone said CBA was required to alert APRA to any remunerations consequences from the report and would reveal those in the annual report later this year. It has already withheld bonuses for the former chief executive Ian Narev and his executive team and changed practices to give the board more discretion in deciding long and short-term incentives.

APRA was ordered in August last year to investigate the bank’s culture, governance, accountability and risk frameworks following a series of scandals at Australia’s biggest lender, which culminated in last year’s Austrac money-laundering scandal. It appointed a panel including former APRA chairman John Laker, company director Jillian Broadbent and former Australian Competition and Consumer Commission chairman Graeme Samuel.

The APRA review focused on the underlying reasons behind a string of incidents at CBA that have significantly damaged its reputation and public standing.

“The report ... found a number of prominent cultural themes such as a widespread sense of complacency, a reactive stance in dealing with risks, being insular and not learning from experiences and mistakes,” the APRA report said.

The report also noted “an overly collegial and collaborative working environment” which lessened the opportunity for constructive criticism or timely decision-making.

Former chief executive Ian Narev retired from the bank in April, when Mr Comyn, formerly CBA’s retail banking boss, took over. Several other top executives have left the bank.