No bank execs fired ‘an untenable situation’: Bank inquiry chair

Banks put themselves in an “untenable situation” by failing to sack any of the senior executives who presided over a series of scandals involving misconduct in recent years, says the chairman of the government’s bank inquiry, David Coleman.

The fresh criticism of banks came as the corporate regulator also pressed its case for stronger powers to ban senior bankers, something it believes is “crucial” to improving the culture in financial services.


Bank boss rejects naming and shaming

The head of the Commonwealth Bank has rejected any suggestion the identity of senior executives who oversaw scandals within the bank should be revealed.

When asked about Mr Coleman’s comments, National Australia Bank chief Andrew Thorburn responded that culture was the top priority at the bank he leads, while restating there had not been systemic failings at NAB.

After new restrictions on senior bank executives were unveiled in the budget, Mr Coleman said banker testimony on accountability had been one of the most “striking” aspects of the inquiry he leads into the four major banks.

The rolling inquiry delivered its latest report in April, and many of its recommendations have been acted on by the government in a wave of budget changes that place further curbs on senior bank executives.

“For all of the many examples of bad conduct by banks towards customers, and we don’t need to run through them all, the banks were unable to identify any senior executive who had been terminated as a result of that poor customer treatment,” Mr Coleman said at the Thomson Reuters Australian Regulatory Summit in Sydney.

“That’s an untenable situation, and it does suggest a meaningful cultural problem in those organisations,” said Mr Coleman, chairman of the House of Representatives committee on economics.

“The general response of the banks in our committee process was to blame middle managers or rogue employees, which given the numbers of people involved, suggests that there were a lot of rogues on a frolic of their own.”

Alongside the $6.5 billion bank tax, the budget included policies to give the prudential regulator powers to ban senior bank managers, and influence how they are paid. Mr Coleman argued these changes would help to make banks more customer-focused.

“The combined impact of these changes will focus the minds of CEO-reporting executives on customers in a new and much more intense way – and that is exactly what is required,” he said.

The Australian Prudential Regulation Authority, which will enforce the new powers, has stressed it will continue to focus only on issues that could affect a bank’s financial health, rather than the well-being of consumers.

The Australian Securities and Investments Commission deputy chairman, Peter Kell, told the same conference the regulator also needed the power to ban senior executives in banks. He said such a change was “crucial” for giving firms the incentive to act “in the right way”.

“The public rightly expects we will take strong action against corporate wrong-doing, but not just, say, front-line financial adviser or mortgage brokers,” Mr Kell said.

“We remain firmly committed to seeking a power to ban individuals and senior executives from managing financial service firms, making management accountable for poor conduct within a firm, not just the frontline staff.”

Senior bankers have reacted cautiously to APRA’s new powers. While acknowledging the need for improvements in culture, bankers have emphasised the changes their businesses have made to improve their internal cultures.

Mr Thorburn said in a separate interview that at NAB there was “nothing more important” than getting the culture right.

He said most of the problems in its wealth arm had occurred several years ago, and were acted upon by management. NAB told Mr Coleman’s inquiry in March that 1138 people at NAB did not meet its code of conduct and had faced “consequences”, including dismissal in some cases.

“We know about them, we’re dealing with them, and there have been appropriate consequences dealt to various individuals, including tightening up on our conduct requirements,” Mr Thorburn told BusinessDay.

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