EY blasts CBA wealth systems

An independent expert has criticised some of Commonwealth Bank’s processes and controls.

An independent expert has criticised some of Commonwealth Bank’s processes and controls to ensure wealth customers receive their contracted services, as CBA confirmed yesterday a six-month extension to an ASIC enforceable undertaking agreed in April.

While EY concluded that CBA’s processes were adequate, it said improvements could be made to address the high reliance on manual systems, limitations on the bank’s ability to analyse and report information, and the low level of control awareness within the ­business.

“Manual processes and controls have a higher inherent risk of failure due to human error or through being overridden,” EY said. “Increased use of automated and system controls needs to occur to make the control ­environment strong and more ­sustainable.”

ASIC accepted an enforceable undertaking from Commonwealth Financial Planning and BW Financial Advice in April over their fees-for-no-service conduct.

The regulator found that customers of the two entities might not have received financial planning services for which they had paid in the period June 2016 to June last year. The issue was reported to ASIC in 2014.

CBA said in a statement yesterday that it had asked for an extension to the enforceable under­taking to end of January next year so it had enough time to complete an additional customer review and remediation work it was conducting. “The extension also allows EY as the independent expert to review and report on that work as well as the steps CFPL has taken to further strengthen its ongoing service delivery processes,” CBA said.

“The additional review and remediation work will ensure every customer has received the services they paid for in the additional 12-month review period, prior to the implementation of improvements to advice business systems and processes that were made in June 2017.”

Also yesterday, former ACCC chairman Graeme Samuel, one of three members of an APRA-­appointed panel that probed CBA’s governance and culture, again lashed out at the major banks over misconduct highlighted in the financial services royal commission. Speaking at a Customer Owned Banking Association conference in Melbourne, Mr Samuel said senior business people had deservedly had their reputations trashed, and others had escaped the worst outcomes due to a “thick coating of teflon”.

“And as I observed the traumatising of the executive-level witnesses as they admitted to the deeds of misconduct under incisive examination by counsel assisting the commission, I’m left wondering why in all of heaven they weren’t traumatised so much earlier when they knew that they were overseeing the business operations in which that misconduct was an integral part,” he said.

However, Mr Samuel predicted that the lessons of 2018 would be relatively short-lived.

Corporate Australia, he said, had a remarkably brief memory cycle when it came to heeding the lessons of these events.

One way to prevent this, as royal commissioner Kenneth Hayne suggested, was to use the court process as a vital element of enforcement. This required a specialised group of judges with expertise in the complexities of corporate, securities and financial services law, a fast-track court process and recognition that white collar misconduct needed the toughest of penalties.

Mr Samuel said the major banks had a major repair job ahead of them to restore trust.

“They all are now loudly proclaiming that they have been remiss in not putting their customers first. They are all promising to do so henceforth. But will they walk the walk?” he said.