Out of their depth at the Royal Commission

  • By Pat McConnell

There were so many people out of their depth at the Royal Commission (RC) in the last fortnight, it was like an episode of Bondi Rescue on a public holiday.

First up was the new CEO of Commonwealth Bank, Matt Comyn, who despite being head of the retail division that had sold dodgy insurance to over 60,000 ineligible customers, pushed the previous CEO, Ian Narev, into the deep end.

Using some old handwritten notes, he claimed he had warned Narev about the problems but, when knocked back, he backed down.

Next up was the CBA chair, Catherine Livingstone, who when quizzed about why Comyn was given the CEO gig, said that basically no one else wanted the job.  She also claimed that when the money laundering scandal that cost the bank some $700 million in fines was first brought up some years back, she had warned the board, but apparently her warnings were not recorded in the board minutes.  

For that she dumped on the previous CBA chairman, David Turner, who it turns out she had asked for some of his bonuses back, but he refused. As a result, Livingstone did not come across as the expert in corporate governance sometimes claimed by the press.

Dumping on previous managers became the common theme for the fortnight, which means that in the new RC era, the new BEAR regulation, has become the PEAR (Previous Executive Accountability Regime).

Next into the hot water at the RC was Brian Hartzer, CEO of Westpac, who, unable to blame the previous CEO, took to blaming everyone else.

Despite admitting that Westpac’s systems were so bad that they did not know how many customers they had charged for no services, the CEO claimed that he should not be picked upon because the other banks were much worse.

Hartzer then endeared himself to Commissioner, Justice Hayne, by petulantly rejecting all of the recommendations in the Interim Report.

Next into the water was Nicholas Moore, the outgoing CEO of Macquarie, who slid off his elegant Gucci loafers for a quick paddle in the shallows, pleasing the Commissioner by explaining why Macquarie’s’ remuneration policies were so much better than everyone’s else’s. He had done his job for the Commissioner and then swanned off for a well-earned retirement.

The final day of Sydney hearings was a rolling shipwreck for James Shipton, new chair of ASIC. Shipton stared off by dumping on the previous chair (several times).  In addition, he blamed ASIC’s failure to do its job on: lack of money; the law; and the sheer difficulty of getting banks to pay attention to him.

As an example of how understaffed he believed ASIC was, Shipton surprisingly stated that ASIC had half the number of enforcement staff as the police in the Australian Capital Territory (ACT).

However, he forgot to mention that the ACT police had investigated nearly 50,000 crimes in the territory in 2017 (including seven murders) whereas ASIC had conspicuously failed to land a blow on any of the big four banks, except for a few negotiated enforceable undertakings and derisory ‘community contributions’.

The blame game continued

Maybe the Commissioner might ponder disbanding the banking regulators and handing the job over to the Federal Police?  

When the RC moved on to Melbourne, first up was Andrew Thorburn, CEO of NAB and apparently ‘free fishing’ aficionado.

Having seen how well blaming others had worked, Thorburn caught the next big wave and dumped on everyone he could think of: Andrew Hagger, who had earlier tanked at the RC and had already left the bank; Sharon Cook, the bank's chief legal and commercial counsel; and David Gall, who had been the bank’s long-term chief risk officer, before being promoted/demoted to chief customer officer.

Maybe the Commissioner might ponder disbanding the banking regulators and handing the job over to the Federal Police?  

Thorburn then admitted the bank's bonus schemes encouraged bad behaviour and that the bank was ‘drifting’ and ‘distracted’. It was obvious that Thorburn was sinking fast and was not helped by his boss.

Next up, was Dr Ken Henry, chair of NAB, ex Treasury Secretary and hero of the GFC.  He did his reputation no favours, however, starting out by blaming ASIC for not agreeing quickly enough to allow NAB to pay back customers for providing no service.

Asked why NAB had not acted on their own initiative to remediate customers duded by the bank, provided the opportunity for Dr Henry to unveil his testy side. Apparently, according to the good doctor, it was all too difficult for Rowena Orr QC, counsel assisting the RC and the sharpest of advocates, to understand.

It didi not help Dr Henry’s humour when it was revealed that the NAB board and the Risk Committee, which Dr Henry had headed before becoming chair, had been warned many times about the bank’s failure to comply with the law and had been in breach of its own risk appetite limits for three years.

Next up was Mike Wilkins, the outgoing CEO of AMP.  It is sufficient to note that, having had an earlier roasting by the RC, the CEO, as hard as it is to believe, made the situation even worse by admitting it may take up to 17 years to remediate some customers.  AMP-RIP?

Last up for the big four banks was Shayne Elliott, CEO of ANZ, who found a new candidate to blame customers. Apparently, the banking business was just so complicated, it took an average of four years for ANZ to detect that it had duded customers and a further seven months to report a breach to ASIC.   

ANZ’s systems were so bad that, during that time, it took an average of another six months to make the first repayment.  Internally it appears that ANZ staff considered remediation of duded customers to be a ‘distraction’ at the ‘expense of earning revenue’.

Overall, however, Elliott was both contrite and positive, until he was just about to get out of the hot water when he was hooked, landed and filleted by Orr.  

Enter the Yes Minister bureaucrat

When questioned about ANZ’s remuneration policies that allow senior managers to get 300 per cent of their bonuses despite wide spread claims of banking misconduct, Elliott insisted that although he did not know exactly why bonuses were paid, it would be impossible to change the policies.   

Next up to be quizzed was Rob Johanson, chairman of Bendigo and Adelaide Bank, who, to the obvious delight (and plan) of Commissioner Hayne, said that excessive bonuses were just not needed.

The final witness on the stand was the ultimate ‘Yes Minister’ bureaucrat, Wayne Byres, chair of APRA. Byres displayed an almost Trumpian self-aggrandisement when he claimed that he had been told that the CBA inquiry was a fabulous piece of work.  

It must be remembered that, although CBA had been the focus of APRA’s most intensive supervision for a decade, APRA was shamed into starting an ‘independent’ investigation when the CBA was fined some $700 million by another regulator, AUSTRAC.

It is, however, hard to believe that after many years of being rolled over and tickled on the tummy by the banks, APRA will turn from a sycophantic shiatzu to a regulatory rottweiler, any time soon.

The inquiry slammed every aspect of governance and risk management at Australia’s largest and riskiest bank, yet these problems had apparently escaped APRA’s notice over the previous decade.

Byres then boasted that APRA was going to be a bit of a supervisor ‘mongrel’ from now on. It is, however, hard to believe that after many years of being rolled over and tickled on the tummy by the banks, APRA will turn from a sycophantic shiatzu to a regulatory rottweiler, any time soon.

And so, the best drama/comedy on TV for some time has ended with reputations shredded and banking superstars crying all the way back to their banks. Their only question now is whether to jump before, or after, the Commissioner's final report is published next February.