NAB first to feel power of a Kenneth Hayne sucker punch
The wake-up call was delivered like a sharp bolt of electricity by Kenneth Hayne, and it came early in the afternoon session.
The wake-up call was delivered like a sharp bolt of electricity by royal commissioner Kenneth Hayne, and it came early in the afternoon session.
Having drawn the short straw to appear as the financial services royal commission’s first witness, Anthony Waldron, National Australia Bank’s executive general manager, broker partnerships, was answering questions in a calm and methodical way.
He acknowledged that controls and processes had broken down in the continuing introducer program, where NAB pays commissions for successful home-lending approvals.
But then Hayne intervened, first with a couple of sucker punches and then the coup de grace. The commissioner acknowledged banking was a “human” system and that things can go wrong through dishonesty, neglect, carelessness or sheer coincidence. You could sense there was a “but” coming, and sure enough there was.
“One thing I might have to look at is what is the attitude of the industry ... to obedience to the law — obedience to the law that governs their affairs,” Hayne said. “There may be a difference between a breakdown in controls and an acknowledgment of a breach of laws.”
The commissioner advised Waldron to “deal with it as you wish”, but warned, seemingly with a touch of menace, that “these are ideas at least on the table”.
So there it was — the main lesson from day one. As much as this inquiry will ultimately be about law reform, Hayne will not hesitate to make an example of wayward bankers and their associates. Senior management, as well, will not be spared from his forensic scythe. Waldron got his current role in late 2016, and part of his brief was to fix up the introducer program that had gone off the rails.
It became clear that counsel assisting, Rowena Orr, QC, wasn’t at all interested in Waldron’s late arrival at the introducer train wreck, and had even less interest in the fact he had no involvement in NAB’s failure to make timely written reports to ASIC on the “significant” misconduct in the program.
NAB, she said, had chosen him to represent the bank, so it was up to Waldron to answer her questions. We also learned yesterday that the commission will adhere strictly to its script, or terms of reference. There will be common themes and questions as it goes about its business of public hearings and conducting exhaustive case studies on industry misconduct and poor behaviour.
Fundamentally, the commission wants to know if the misconduct can be attributed to an overriding culture, system or practice, particularly in the structure of remuneration and the payment of incentives.
That’s why the introducer program was a perfect opening instalment. Hayne also wants to know why the misconduct went undetected or continued for a long time, whether the institution had adequate processes to detect wrongdoing, and whether it responded in a timely and meaningful way.
Confoundingly, Commonwealth Bank again managed to poke a stick in the eye of the royal commission bear. Why CBA continues to take an aggressive legal approach has gone well beyond the point of comprehension.
When Hayne, as with other institutions, asked for a 50-page submission from CBA subsidiary Aussie about its poor conduct dating back to 2008, the parent company chose to make Aussie part of its own 50-page confession statement. The Aussie component amounted to no more than eight paragraphs, and there were no admissions of misconduct.
In response to a second request for information, CBA produced a spreadsheet outlining misconduct by Aussie over the past five years, including seven examples of irresponsible lending and eight examples of document falsification for home loans. One day, CBA might surprise everyone by doing exactly as it is asked.
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