NAB’s board met ASIC days before the Hayne horror unfolded

For Andrew Thorburn, it may have been a challenging meeting to be seated with ASIC officials.

NAB chief customer officer Andrew Hagger. Picture: AAP

A top level meeting between ­National Australia Bank directors led by chairman Ken Henry and Australian Securities & Investments Commission officers led by new chairman James Shipton was held in Sydney a week before NAB resumed giving explosive evidence before the royal commission into banking and superannuation misconduct.

The meeting was held at NAB’s George Street, Sydney, headquarters on July 30.

It included NAB chief executive Andrew Thorburn, chief risk officer David Gall and chief legal counsel Sharon Cook. On the ASIC side, Shipton brought his new deputy chair Daniel Crennan QC, who joined recently to add enforcement heft, commissioners John Price and Cathie Armour, and ASIC executive Michael Saadat.

For both Thorburn and his chairman it may have been a challenging meeting to be seated with the regulator that has pursued the big banks relentlessly over wrongly-charged fees to customers and forced them into huge remediation programs – work that has formed the spine of blistering revelations in the royal commission, as well as Saadat, a hard-hitting member of ASIC’s banking and insurance team.

The meeting was arranged late last year as a regular item on the calendar, but its timing meant the broad-ranging discussion about the culture of the banking industry and opportunities for banks to improve their behaviour would have held a more distinct chime for the directors of the bank.

Yesterday a NAB spokesman said the board meeting was “part of its normal schedule of regular engagement with regulators”.

Asked whether Thorburn had reported to the NAB board on current and past steps to deal with customer remediation regarding fees for no service, the spokesman said NAB’s board and management had had “regular discussions regarding these matters”.

Like the other big banks, NAB featured in the royal commission in all previous rounds, starting in round one with revelations of the bank’s “Introducer Program” for home loan referrals, which became infested with cash bribes paid in envelopes and fake loan documents as NAB staff tried to meet bonus targets.

In the second round, NAB was grilled over financial advisers and fees for no service; this was a round that ultimately revolved around AMP in the witness box and in the resulting furore, AMP lost both its chairman and chief executive.

With NAB set to return to the witness box on August 6, a meeting with ASIC virtually on the eve of the commission’s resumption may have been far from a free and easy cup of tea.

NAB had been at pains to give the impression all year that the commission was an important learning vehicle for the bank to do better and restore trust.

On January 29, Cook issued a statement waiving confidentiality for NAB customers who wanted to make a statement to the royal commission.

On March 13, Thorburn put out a letter about the journey for the bank “to grow and change”. On April 20 he issued a statement saying the commission was necessary and justified and would be a catalyst to restore trust. NAB was committed more than ever to ensure customers came first, he said.

But evidence before the commission in the past week showed a bank focused on keeping fees rolling in and deflecting ASIC.

By the end of day one of round five, Monday August 6, evidence had been put that NAB had come up with a strategy in 2016 to keep charging commission fees by transferring customers between platforms to continue a grand­fathering provision. It might have been considered technically legal, but it gave the perception of being tricky at best.

It did not sound like a strategy caring for customers.

By close of business at the commission last Friday, headlines had been rolling with the news that NAB had more than 100 breaches of the corporations law for failing to report breaches to ASIC within 10 days, a criminal ­offence when the licensee has deemed the breach significant.

By Monday this week, former NAB wealth division head ­Andrew Hagger was recalled to the stand, where he was grilled on why NAB did not frankly and willingly disclose to ASIC during a phone call in October 2016 that it had increased its estimate of how much compensation was due to customers over fees for no service — from $16.9 million to $34m — just when it knew ASIC was finalising its first report on this issue.

There was, however, a single moment in the hearing that revealed a NAB middle executive with a well-tuned ear. Corporate affairs adviser Chris Owen, according to documents before the commission, suggested the bank be upfront with the regulator and customers about the amount of compensation to be paid, suggesting it was the best long-term strategy for the bank. His advice was ignored.

How edgy the NAB board of directors has been over the commission revelations remains behind the boardroom curtain thus far. However, there has been no apology or public words on the matter from Henry or indeed from any of the chairs of the other big banks in the same dank pool.

Henry has been frank in the past when asked about the relationship with his CEO. He was not above making a point a year ago in a discussion about trust that it meant doing the right thing by the company.

During a trans-Tasman Business Circle lunch in Melbourne in August last year, Henry reflected on the loss of trust in banking and the difficulty in rebuilding.

He digressed to consider an imaginary situation where things might go wrong. Referring to Thorburn, he said: “He knows, although I’ve never said it to him like this before, there will come a time when I have to throw him under a bus … he has to trust me when I’m doing that I am actually doing that in the best interests of the company.”

Henry said the tables might also turn: “There could also come a time when he comes to me and says, ‘Ken, you know what, I think you’ve lost the support of your fellow directors’.”

Thorburn, attending the same lunch, was asked if there was any risk of NAB being caught in the same scissor of scandal that had enveloped CBA after the AUSTRAC legal action prompted wide investigations by other regulators. When mistakes occurred, Thorburn said, top bank managers needed to “own it”.

On Wednesday this week, the commission released a document that was described across the media as “explosive”. Titled ‘Outline of suspected offending by the NAB group’, the document showed ASIC accusing NAB of at least three criminal offences and 19 civil breaches relating to fees for no service.

The regulator described NAB’s conduct as serious and systemic.