CBA chair apologises; shareholders approve REM report

Commonwealth Bank chairman Catherine Livingstone said the lender's search for a new chief executive is "well advanced".

At the bank's annual general meeting in Sydney on Thursday, Livingstone told shareholders that CBA chief Ian Narev - who is retiring amid wide-ranging money laundering allegations - is still expected to leave by June 30.

"A global search for Ian's replacement is well advanced, and we are considering internal candidates, and external candidates from Australia and offshore,” she said.

During her speech, the CBA chair apologised to shareholders for the money laundering debacle, adding that while the bank wanted to be as transparent as possible about the matter, there were limits to what she could say at the AGM.

However, she said the bank believed it had met its continuous disclosure obligations and was not aware that Austrac, the financial rime-fighting agency, was going to launch legal proceedings until they were filed on August 3.

Continuous disclosure

Shortly afterwards, the corporate watchdog launched an investigation into whether the CBA should have disclosed more information to the market about the Austrac matter before the legal claim was lodged.

Livingston said CBA is responding to requests for information from ASIC, which is seeking information on board knowledge of matters raised by the anti-money laundering regulator.

Subsequent to ASIC's probe, a plaintiff law firm launched a class action against Australia’s biggest bank, essentially based on a premise that the lender had not disclosed information about the Austrac matter sooner.

Speaking about Austrac’s statement of claim, the CBA chair told shareholders that it included matters of which the CBA had no prior knowledge.

Compliance deficiency

“It is also important to stress that there is no suggestion in the statement of claim that anyone at the bank knowingly contributed to the matters that have been identified, nor that there has been misconduct on the part of bank employees.

“Nonetheless, it is clear that the bank was deficient in aspects of its compliance with Austrac’s regulations, and it is equally clear that this has damaged our reputation: with customers, shareholders, regulators and government.

“As chairman, and on behalf of the board, I apologise sincerely for this deficiency and its consequence".

Referring to what could be the country’s largest shareholder class action, she said the bank would "defend it vigorously”.

CBA’s response to Austrac’s allegations is required to be lodged with the Court by the 15th of December, and will be made public.

Executive pay

With CBA looking down the barrel of a second strike against its remuneration report, Livingstone said the board will, when necessary, target managers' pay.

She told the meeting that the board is prepared to “exercise significant discretion to reduce or cancel variable remuneration.”

The chair reminded shareholders that because of the reputational damage that occurred this year, the board reduced to zero the short term variable incentives for key executives and significantly reduced deferred short and long term variable incentives for "certain former executives".

This must have reassured them as after the AGM it emerged that more than 92 per cent of votes supported CBA's latest remuneration report.

Thus, the board avoided a spill which would have been triggered if 25 per cent or more shareholders at the AGM voted for a second strike against the report.

Chief executive Ian Narev told shareholders at the meeting that CBA’s performance has been up with the best banks in the world although the same cannot be said of how it had managed some of our operational risks.

"When I do leave, it will be with a combination of pride in what we have achieved for you, and sadness for where we have disappointed you."

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