- Banking royal commission: Some questions it should ask the CEOs and regulator
- By Daniel Ziffer
- Contributed by: Sime ( 14 articles in 2018 )
We've had six rounds of royal commission hearings on banking topics, such as insurance and financial planning, with evidence from experts, regulators, bank executives and victims of misconduct.
Now, after the release of the royal commission's preliminary report, the chief executives and, in some cases, board chairs will sit in the witness box for an under-oath grilling.
The lawyers will have questions about the issues raised in the interim report, ahead of a final report and recommendations due out in February.
I've never fallen asleep in a royal commission hearing, but the warm room and occasionally tedious legal arguments do push you to daydream a little.
In that vein, I'm imagining what I'd do if Commissioner Kenneth Hayne spied me in the back row — having sat there all year — and called me forward to join senior counsel assisting Rowena Orr QC and the team to put some questions to the bosses.
Once everyone had recovered from the shock of an unqualified journalist firing off questions, this is what I'd open with.
For all CEOs and chairs:
Fee for no service is when customers are charged a fee for services that are not provided, were not provided or could never be provided. ASIC believes the total amount taken from Australian customers could top $1 billion. Is it theft?
In most cases of wrongdoing, junior staff — examples include call-centre workers and IT staff in Bangalore — have raised the issue with their superiors. Generally, the problem revolved around customers being charged money incorrectly and any fix was denied or delayed until years later. Why are your junior staff more willing to take action for the customer than your managers?
For Matt Comyn, CEO, Commonwealth Bank:
You run a bank which has had so many public scandals — in financial planning, in insurance, in lending, in relation to anti-money-laundering laws — it essentially forced this royal commission into being. You used to run the bank's largest division, the retail bank, where many of the scandals originated. To what extent are you responsible for the culture that allowed these issues to occur?
Do you feel like this is a royal commission into you?
You charged dead customers fees for no service that the bank wasn't entitled to even if the person was alive. Other institutions did too. Some advisers received warnings about their actions, others nothing. How can living customers expect the bank to treat them with respect, if some staff are willing to charge for 'personal advice' given to people who are dead?
On the fee-for-no-service issue, you had customer complaints from 2008 onwards and then an internal report about how to fix it, followed by a commissioned report from Deloitte in 2012. You eventually notified ASIC of a 'breach' of the law in August 2014. You are meant to notify ASIC of breaches within 10 days. How do you justify staff, at a high level in the bank, treating the regulator with such disregard?
For Nicholas Moore, (outgoing) CEO, Macquarie Bank:
Your bank has a reputation as being tough and aggressive. (Just this year I sat in a Senate hearing where some described being 'Macquaried'). Despite being involved in financial planning scandals and providing a lot of mortgages and credit cards, this is first appearance for the bank in the witness box. Why?
You are the highest paid executive of a listed Australian company. Last year you were paid $18.9 million — congratulations!
The commission has found the root causes of misconduct to be linked to four main factors: culture, governance, remuneration and risk management practices. When you and your staff are paid so much (remuneration), how does it impact on the decisions you make about behaviour (culture), doing the right thing (governance) and working within what's legal (risk management)?
For Mike Wilkins, acting CEO, AMP
The company has lost a chair and CEO. Part of the furore was a supposedly independent report, sent to regulators, which was altered. AMP has also admitted lying to regulators. Is lying to a regulator, or being involved in a report you know to be false, a sackable offence? Is it a criminal offence?
Your company made deliberate business decisions that it knew were wrong, including imposing fees for longer than was legal and charging life insurance premiums to dead people. How can AMP customers have confidence that you will act in their interests?
For James Shipton, chair, ASIC
You're able to prosecute banks if they breach their requirement to tell ASIC of unlawful behaviour within 10 business days. The royal commission has heard about multiple examples where several layers of management knew about issues for years before informing you. Why haven't you prosecuted the breaches?
You generally don't go to court against the big four, preferring to seek 'enforceable undertakings' — negotiated agreements. What impression does that send to the public?
ANZ got tellers to push superannuation products. It was illegal, because the vast majority of tellers are not qualified to sell such products. The bank did it anyway, accruing $3.6 billion in funds, which it continues to profit from. ASIC agreed to fine the bank $1.25 million. How was that figure arrived at? To the larger question, does a fine of millions impact behaviour potentially involving hundreds of millions or billions in revenue?