Branch tellers not rewarded for sales – CBA

Commonwealth Bank has announced further changes to the way   frontline staff are remunerated, increasing the focus on customer service and rewarding branch staff for delivering better customer outcomes, not financial outcomes.

The nation’s largest bank and branch network will move approximately 2000 customer service representatives, also known as tellers, to a new remuneration plan focused on the individual’s contribution to providing superior customer service. Any links to financial measures have been abolished.

Commonwealth Bank Executive General Manager, Angus Sullivan, said: “This change will reward our tellers for continuing to provide superior service to the millions of customers we serve around the country.

“We have been listening to our customers and this is another step to ensure banking is fairer, simpler and more transparent. Customers can be confident that our tellers are not being paid to sell them products.

“The new remuneration plan will support and encourage our teams to have better quality conversations with customers, understand their needs and provide the best possible service.

“This will further strengthen our customer focus and align the way we reward our people with industry standards and community expectations.”

These new measures will be backdated to 1 July 2017, the start of the current CBA performance period, removing all financial measures from individual performance.

In addition, close to 200 Bankwest branch tellers will also move onto a customer-focused remuneration structure from 1 October 2017, the start of the Bankwest performance period.

Commonwealth Bank has already made a number of changes moving away from sales-based incentives and recognition programs, and towards values-based rewards.

Mr Sullivan said this is another example of our commitment to implement all Sedgwick Review recommendations ahead of the 2020 deadline.

“We understand that there is always more to do, and we have been actively participating in the independent review by Mr Sedgwick and the Australian Bankers Association,” Mr Sullivan added.

CBA To Launch New Low Rate Credit Card

Commonwealth Bank today has announced three new initiatives including a new credit card with an interest rate below 10 per cent.

The three initiatives are:

  1. A new credit card with a 9.90 per cent purchase interest rate
  2. All customers with a credit card can receive real-time alerts for credit card repayments and high cost transactions, and all transaction account customers can receive overdrawn account alerts
  3. All credit card customers will have access to an instalment feature designed to help them pay down existing balances or large purchases, in easy fixed instalments

Clive van Horen, Executive General Manager at Commonwealth Bank, said: “We’ve heard feedback from customers and consumer groups and understand there’s a need to offer a greater range of affordable and easy to manage products.”

Designed to give customers more visibility and control over their personal finances, the new credit card, real-time alerts, and instalment feature will launch in phases.

“We know there’s strong demand for a simple credit card option and we also recognise we need to help our customers avoid credit card late payment and overdrawn account fees. The real-time alerts in our CommBank App give customers even more tools to help manage their spending and avoid fees and charges,” said Mr van Horen.

New credit card

Available from early 2018, the new CommBank credit card will offer a highly competitive interest rate of 9.90 per cent, and a low account keeping fee of just $5 per month. The new credit card is suited to customers who want a low, competitive interest rate, low account keeping fee with a low maximum limit, and no access to cash advances.

Real-time alerts for credit card repayments, overdrawn accounts and high cost transactions

From November, customers will be able to take advantage of three new alerts:

  • Customers with the CommBank App will receive real-time alerts, reminding them their credit card payment is due. If their payment becomes overdue, customers will receive an additional alert advising them if they make their payment by midnight the following day they will not incur a late payment fee.
  • Customers whose transaction accounts have been overdrawn due to a scheduled payment or direct debit will receive a real-time alert and they too will not incur an overdrawn access fee if settled by midnight.
  • Customers that make a high cost credit card transaction (such as an ATM cash advance or online gambling) will be alerted in real time that these transactions incur cash advance fees and interest.

Instalment feature

From mid-2018, credit card customers can choose to pay down large purchases or a portion of their balance through fixed monthly instalments at a discounted rate, over a fixed period, allowing them greater control of their credit card repayments.

Empowering customers to manage their spending and avoid fees and charges

These latest product initiatives join the suite of online tools and features launched over the last three years to give customers more visibility over their credit card spending, including:

  • Transaction Notifications: Eligible customers automatically receive an instant notification every time they pay with their credit card.
  • Lock, Block, Limit: Gives customers real-time control over what types of transactions their card could be used for – such as ATM withdrawals and overseas spending. More than 1 million cards have enrolled for this feature since 2014.
  • Spending cap and credit limit decreases: Customers can set a spending cap to manage their spending or reduce their credit limit online. Approximately 13,000 credit limit decreases are performed each month since launch.
  • Spend Tracker: Each credit card transaction is categorised automatically in the CommBank App so customers can see where they are spending and compare expenditure across months.
  • Earlier this year CommBank also launched Click to Close: a feature which allows customers to close their credit cards online through NetBank and the CommBank App.

“We continue to innovate for our customers’ benefit and we hope these latest steps will be welcomed,” added Mr van Horen.

Banks need a ‘better cost structure’: Narev

From Investor Daily.

Australia’s major banks must use data analytics, artificial intelligence and robotics to increase productivity and reduce costs, says outgoing CBA chief executive Ian Narev.

Speaking at a Morningstar conference in Sydney on Friday, outgoing CBA chief executive Ian Narev said the major banks must “adapt or die” when it comes to new technology.

“Over five to 10 years in [the banking] industry, if you do not successfully adapt, you will not succeed,” Mr Narev said.

“I say that without any sense of hyperbole at all. And [CBA] does not feel at all complacent about where we are, because you have got to keep going, but we feel pretty good about our relative position today.”

First, banks need to realise that their customers want to do business online – and will compare their banking experience with Facebook, Apple and Amazon, Mr Narev said.

“Number two is that the opportunities to apply artificial intelligence, data analytics, robotics to fundamental productivity is critical because we need a better cost structure,” Mr Narev said.

“While we are evolving to a better cost structure, we also need to be the responsible employer of 50,000 people and help our own workforce make the transition, which we are very committed to doing.

“So for us, this has been a topic of real focus for the last few years. It will remain a topic into the future. We are committed to adapt.”

Mr Narev also took the opportunity to reiterate his apologies to CBA’s shareholders and customers for “not reaching the standards we should have” regarding AUSTRAC’s accusations of CBA’s failings relating to anti-money laundering compliance.

“We let down our stakeholders and, regardless of the ins and outs of the legal claim, I am sorry for that as the chief executive. I take accountability for it and can assure you that we are taking it extremely seriously,” Mr Narev said.

Mr Narev, who is due to leave CBA by 1 July 2018, also joked about the identity of his successor.

“We have got uncertainty with leadership succession, although I can give you a guarantee that the next chief executive of the Commonwealth Bank will be better than the current one,” he said.

 

CBA goes into damage control over claims of primary school ‘kickbacks’

From The New Daily.

The Commonwealth Bank of Australia has promised to scrap a controversial practice that sees it pay primary schools a commission for every student that signs up to its Dollarmites program.

The decision came just hours after consumer advocacy group CHOICE launched a scathing attack on school banking programs, saying banks should be banned from “flogging their products” in schools.

CHOICE was particularly critical of what it called “kickbacks” paid to participating schools.

But within hours of CHOICE’s attack, CBA – in an effort to fend off yet more bad press – had issued a statement of its own vowing to abolish these so-called “kickbacks”.

“We have heard CHOICE’s concerns about these payments and will engage with the schools, P&Cs [parent and citizens associations] and consumer groups to introduce a change to the way payments are structured from 1 January 2018 that no longer links the payment to the value of students’ deposits,” the statement read.

The bank stopped short of scrapping payments to schools altogether, arguing some sort of payment was necessary to cover the costs to schools of offering the program.

How the Dollarmites program works

CBA’s School Banking program allows primary school children to set up bank accounts through their schools.

The program appeals to children using colourful branding, including a gang of cartoon school kids called the ‘Dollarmites’, gifts, and games aimed at improving financial literacy.

It also incentivises schools to participate by paying them a 5 per cent commission on every deposit up to $10.

Around 4000 schools and 320,000 school kids across Australia are signed up to the program.

The bank sells it as a “fun, interactive and engaging way for young Australians to learn about money and develop good saving habits”.

But in a statement on Thursday, CHOICE chief executive Alan Kirkland painted the program in a more critical light, saying it was a way for the bank to gain “unfettered access” to “flog their products” in schools.

“Rewarding children for saving with cheap toys easily transitions to rewarding young adults with ‘special’ offers of high-interest personal loans and credit cards,” he said.

“It is time to take banks out of financial literacy education, and to stop them from paying schools commissions to flog their products.”

The call was part of a submission to the Productivity Commission’s ongoing inquiry into competition in the Australian financial system.

Of the big four banks, Westpac is the only other that operates a schools program.

A spokesperson for Westpac told The New Daily it does not pay commissions to schools.

ANZ and NAB both said they had no presence in schools.

CBA desperate to avoid more bad press

The Commonwealth Bank’s lightning-quick response comes two months after the bank was embroiled in a money-laundering scandal – its third major scandal of the decade – and reflects the CBA’s growing eagerness to avoid any bad press.

In August, anti-money laundering regulator AUSTRAC launched civil proceedings against CBA in the Federal Court for an alleged 53,700 “serious and systemic” breaches of money laundering and counter-terrorism legislation.

The allegations came on top of similarly high-profile scandals in the bank’s financial advice and life insurance businesses, all of which occurred under the watch of chief executive Ian Narev.

Since the AUSTRAC revelations, CBA has taken a number of bold steps to improve its public image – including announcing the deferred departure of Mr Narev next year, and scrapping ATM fees for non-customers.

Labor’s plan to hold a royal commission into the banking system if it wins the next election – which current polls suggest it will – is putting additional pressure on the banks.

CBA Reclassifies Loans

At 12:13 PM on Friday 29th September, before the long weekend, Commonwealth Bank of Australia (CBA) advised the ASX that following clarification of loan purpose reporting guidelines, certain statistical data have been reclassified as part of regulatory reporting obligations for Authorised Deposit-taking Institutions. It did not come through their normal press release channels.

The reclassification relates to mortgage-secured household lending data for the periods between October 2015 and July 2017. The approximate impacts of the reclassification as at 31 July 2017 include:

  • Restatement of Loans to Households: Housing: Owner-occupied from $278.4bn to $273.9bn;
  • Restatement of Loans to Households: Housing: Investment from $138.2bn to $134.8bn; and
  • Restatement of Loans to Households: Other from $10.1 bn to $18.0 bn

The reclassification is for statistical reporting purposes only and has no impact on customers, the security and serviceability arrangements for these loans or on CBA’s regulatory capital, risk appetite, risk-weighted assets or statutory financial statements.

The reclassification has minimal impact on CBA’s reported volumes relative to APRA’s industry benchmark for investor mortgage growth and limit for new interest-only mortgage lending.

This may go some way to explaining the weird APRA data which came out Friday, compared with the RBA data, which showed a net rise.  Here is the APRA portfolio movements in summary.

So it means CBA loans were switched from classified for property lending, to secured on property for other purposes.  The APRA guidance letter from March 2016 says:

In particular, non-housing loans that are secured by residential property mortgages should not be reported under item5.1.1.1 or 5.1.1.2, but reported under the relevant loan item elsewhere in ARF 320.0.

At very least this switching of loans is unhelpful when trying to understand the trajectory of home lending, including the $58 billion of loans reclassified according to the RBA.

Not having a trusty compass makes policy setting difficult – the recent media reports of macro-prudential biting may be overdone as a result. More reason to think the RBA may hike rates sooner.

Reclassification also masks loan portfolio growth, and also the RBA only reports the value of loans switched between owner occupied and investors, not switched away to non-property purposes.  More fog around the numbers!

CBA introduces new IO ‘simulator’

From Australian Broker.

The Commonwealth Bank of Australia (CBA) has announced a compulsory new digital tool, the Interest Only Simulator, which will be incorporated into its third party lending process.

The simulator will be accessible through CommBroker and will show customers the differences between IO and P&I repayments as well as the financial impacts over the life of the loan for both types of loans. It will be mandatory from 6 October for all customers applying for a new interest only loan.

“The new tool will make it easier for our brokers to have conversations with customers about their needs and their loan options. It will also help ensure customers understand what type of loan is best for them and their situation,” a CBA spokesperson told Australian Broker.

A compulsory Customer Acknowledgement Form will also be included in the simulator. This will be submitted with all interest only home loan applications to ensure that those payments meet the client’s needs.

Brokers are required to provide customers with a copy of this form as a record of the discussion. This can be done electronically as a pdf attachment via email.

“We encourage our customers to choose principal and interest repayments to help them build equity in their home, where this meets their needs and objectives. Customers who currently make interest only payments are encouraged, where they are able, to switch to principal and interest repayments,” the spokesperson said.

CBA’s Sale of Life Insurance Business is Credit Positive

From Moody’s

Last Thursday, Commonwealth Bank of Australia announced that it had agreed to sell its Australian life insurance business, CommInsure Life,7 and its New Zealand life and health insurance businesses, Sovereign,8 to Hong Kong-based insurer AIA Group Limited for AUD3.8 billion ($3.0 billion). The transaction is credit positive for CBA because it will boost its capital adequacy. The deal also is credit positive for AIA because it will strengthen the insurer’s franchise and distribution in Australia and New Zealand with only a modest increase in financial leverage.

The sale price equals a price/book ratio of approximately 1.7x these businesses’ net tangible asset as of June 2017. The two companies also announced a 20-year bancassurance distribution agreements in both markets.

The announced sale comes at a time when mortgage risk weights and capital requirements are rising for Australian banks. In July 2017, the Australian Prudential Regulation Authority announced stricter capital requirements for Australian banks, including that Australia’s four largest banks, including CBA, raise their common equity Tier 1 (CET1) ratios to 10.5% by 1 January 2020.

These sales will put CBA in a strong position to meet this target. As of June 2017, CBA’s CET1 ratio was 10.1%. CBA estimates that the sale will release approximately AUD3 billion of CET1 capital, raising the bank’s fiscal 2017 (which ended 30 June 2017) CET1 ratio by approximately 70 basis points on a pro forma basis. The bank is currently dealing with allegations of non-compliance with Australia’s Anti-Money Laundering and Counter-Terrorism Financing Act that could result in a financial penalty that, depending on its size, could erode the bank’s capital position.

 

For AIA, the transaction will strengthen the insurer’s franchise and scale in Australia and New Zealand, where it will become those market’s largest life insurance provider. The 20-year bancassurance distribution agreements with CBA and ASB Bank Limited, which is CBA’s New Zealand subsidiary, will complement AIA’s distribution in these two markets, where AIA has traditionally focused on group business and the independent financial adviser channel.

AIA’s purchase will increase its financial leverage, although it will be small relative to its capitalization. The net cash outlay for the transaction will be only AUD2.1 billion ($1.7 billion), after taking into account reinsurance arrangements, and AIA’s strong capitalization should be able to easily absorb that amount. As of May 2017, AIA reported total equity attributable to shareholders of $38.3 billion and a solvency ratio of 427% at its main operating company, AIA Company Limited (financial strength Aa2 stable). AIA expects the transaction to be earnings accretive in the first year after deal completion.

From a strategic perspective, the transaction aligns AIA and CBA with their respective strengths in insurance product origination and distribution. AIA already has a strong track record in Australia and New Zealand and has strong capabilities in group-wide risk management, claims management and product development, resources on which it can leverage to further enhance its newly acquired businesses

CBA Axes “Foreign” ATM Charges

The CBA today (yes on a Sunday!) has announced they are killing the ATM charge incurred by non-CBA customers withdrawing cash from their ATMs.

In a first for an Australian bank, Commonwealth Bank has removed ATM withdrawal fees so all CommBank and non-CommBank customers won’t be charged an ATM withdrawal fee by us when they take cash out at any of our 3,400 ATMs.

RBA data shows that Australians made more than 250 million ATM withdrawals from banks other than their own last year so the move is designed to increase convenience and bring savings.

“Australians have complained for some time about being charged fees for using another bank’s ATM,” Matt Comyn, Group Executive, Retail Banking Services, said today.

“We have been listening to consumer groups and our customers and understand that there’s a need to make changes that benefit all Australians, no matter who they bank with. This is one of the steps we’re taking to make that happen,” Mr Comyn said.

“As Australia’s largest bank, with one of the largest branch and ATM networks, we think this change will benefit many Australians and hopefully demonstrate our willingness to listen and act on customer feedback.”

No ATM withdrawal fee access applies to CommBank-branded ATMs and excludes Bankwest ATMs and customers using overseas cards.

The number of withdrawals from ATMs (and the number of ATMs in use) are falling, as other non-cash payment mechanisms proliferate – such as pay wave, debit cards and mobile payments.  We expect the downward trajectory to accelerate as non-cash alternatives continue to grow. Customers can also get cash out at supermarkets, and this alternative has become popular for those who need to get their hands on real notes.

Under half have a charge attached, those are withdrawals from another bank’s ATMs.

As we said in a recent post there is a generation shift in play as digital natives continue to adopt smartphone based payment options, from Applepay, to NFC transactions in shops, or apps like paypal as well as the move to debt. Even digital migrants are using electronic mechanisms, such as smart phones, internet banking, contactless payments and Bpay is also a popular option.

Data from the RBA shows the volume of ATM cash withdrawal transactions has fallen by 15% over 3 years, whilst the gross value has slipped a little (and fallen in post-inflation adjusted terms). Debit card transactions are more than taking up the slack. But there is also more going on here.

We are approaching a tipping point where the economics of ATMs will not make sense, other than at a few high traffic locations, as there a fixed costs relating to installation and maintenance (including the cash top-up) and income is linked to volumes. There was a proliferation of third party ATMs in for example retail sites in the 1990’s, but these are getting less use too. So we think the number of machines will fall.

Meantime the ubiquitous smart phone is set to become your personal finance assistant, your electronic wallet and electronic credit card. Just do not lose your phone!

As a result, traditional channels such the the branch, ATM and even plastic are all under threat. Cash will become less important in every day life, but it will remain, used perhaps by people less comfortable with the technology, or in the black economy. It would not surprise me if down the track larger bank notes started to disappear under the guise of migration to digitally based more cost-efficient payment solutions, which just happen also to be easier to track.

Meantime, the ATM just got out-evolved by the smartphone.

Around $500 million was charged by banks to customers, and the average fee is $2 per transaction.  CBA has the largest fleet of ATMs across the country, with more than 3,400.

This is a move which was expected, given there are overseas precedents to removing ATM fees, and volumes are falling.  Of the 70,000 ATMs in the UK network, around 16,000 charge users a fee per withdrawal.

CBA will hope to gain a positive reaction, to counter the recent negative publicity surrounding its business.  It will be interesting to see if other banks will follow (some will require IT modifications, so it may take some time), we suspect they might, which would be a small win for consumers.

 

 

 

CBA Sells Life Insurance Businesses

Commonwealth Bank today announced the sale of 100% of its life insurance businesses in Australia (“CommInsure Life”) and New Zealand (“Sovereign”) to AIA Group Limited (“AIA”) for $3.8 billion (the “Transaction”). The sale agreement also includes a 20-year partnership with AIA for the provision of life insurance products to customers in Australia and New Zealand.

CommInsure Life and Sovereign customers will retain all the current benefits of their existing policies. The Transaction and partnership announced today will allow customers to have continued access to high quality life insurance products through Commonwealth Bank and life and health insurance products through ASB, with the addition of AIA solutions to our offerings. Customers will benefit from AIA’s innovation in life insurance including a focus on digital engagement, the benefits and synergies of global scale and specialisation, and their strong bancassurance experience.

AIA is the largest independent publicly listed pan-Asian life insurance group and has well established life insurance businesses in Australia and New Zealand. The combined operations from this transaction will make AIA the market leader in both Australia and New Zealand.

Commonwealth Bank Chief Executive Officer Ian Narev said: “Providing our customers with access to high quality products and services for all their financial needs is core to our vision of securing and enhancing financial wellbeing. We have said for some time that while distributing life insurance is a fundamental part of that strategy, we were open to different models for doing so. The combination of AIA’s leading insurance capability and scale and Commonwealth Bank’s broad distribution, and our complementary values and commitment to customer focus and innovation, mean that a partnership between us will create an even better experience for our customers, in a more efficient way for our shareholders.”

AIA Group Chief Executive and President, Ng Keng Hooi, said: “The acquisition of CBA’s life insurance businesses and the new 20-year bancassurance partnership with CBA will strengthen AIA’s protection market leadership and expand our distribution capabilities in these markets. We look forward to welcoming our new customers and colleagues, and working with CBA to deliver innovative insurance products and services that meet the growing financial protection needs of customers across Australia and New Zealand.”

The Transaction will deliver important strategic benefits to Commonwealth Bank, contributing to the Group’s vision to secure and enhance the financial wellbeing of customers whilst creating value for shareholders.

The sale price is $3.8 billion, a multiple of 16.9x FY17 pro forma earnings and 1.1x the embedded value of CommInsure Life and Sovereign. A pre-completion dividend is also expected to be received by Commonwealth Bank (amount subject to the timing of completion, business performance and regulatory approvals).

Under the terms of the partnership, Commonwealth Bank will continue to earn income on the distribution of life and health insurance products.

The Transaction is expected to release approximately $3 billion of Common Equity Tier 1 (“CET1”) capital and result in a pro forma uplift to the Group’s FY17 CET1 ratio of approximately 70 basis points on an APRA basis. Due predominantly to the carrying value of goodwill, the Transaction is expected to result in an indicative after tax accounting loss on sale of approximately $300 million, net of separation and transaction costs.

The Transaction and partnership do not include general insurance and the CommInsure brand will be retained. The Transaction is subject to certain conditions and regulatory approvals in Australia and New Zealand and is also conditional upon the transfer of Commonwealth Bank’s equity interest in BoComm Life Insurance Company Limited (“BoComm Life”) out of CommInsure. Commonwealth Bank is considering a range of strategic alternatives for the BoComm Life equity interest, which would be conditional on approval from the China Insurance Regulatory Commission. The Transaction is expected to be completed in calendar year 2018.

 

Where the accountability problems started at CBA

From The Conversation.

The heads or deputy heads of the three main banking regulators (the Australian Prudential Regulatory Authority, the Australian Securities and Investments Commission and the Reserve Bank of Australia) spoke at the annual regulators’ lunch last week. Guy Debelle, who is relatively new to his role as deputy governor at the RBA, summarised the feelings of the regulators at the lunch in regards to the public’s lack of trust in banks:

No one feels that anything particularly has changed, because even if the issue occurred a few years ago, it still generates the headlines today, and just reinforces the belief [that the banks cannot be trusted].

Unfortunately that’s because these problems were never actually resolved at the time, with regulators being palmed off with internal inquiries, until the scandal went off the front page. Of course the problems that have occurred recently at banks, especially CBA, are going to be dredged up again and again, because customers (unlike regulators) really suffered and no one was ever held to account.

On the same day, APRA chairman Wayne Byers also announced the makeup of the inquiry panel to which it has outsourced its job. The agency also released the terms of reference that will govern the conduct of the inquiry over the next six months.

Way way down the list of things to do is assessing the CBA’s “accountability framework” and whether it conflicts with “sound risk management and compliance outcomes”.

Note the terms of reference do not discuss “accountability”, per se, merely whether the framework (i.e. organisation charts and policies) is effective or not. Instead, the terms of reference discuss whether it conflicts with other policies and organisation charts. It is Olympic standard navel gazing, rather than action on the part of APRA, and a very minor part of the panel’s work.

But, accountability is not only about “what” but about the “who” and, as the French philosopher Molière wrote, “it is not only what we do, but also what we do not do, for which we are accountable”.

Inquiry panel member, John Laker, is also chairman of the Banking Finance Oath initiative, which works to promote “moral and ethical standards in the banking and finance profession”. He will be well placed then to remind CBA directors and managers of one of the key tenets of that oath:

I will accept responsibility for my actions [and] in these and all other matters; My word is my bond.

Responsibility and accountability are personal not commercial constructs and, notwithstanding the latest knee-jerk reaction to the money laundering scandal, these values have been in very short supply in CBA, over the last decade.

In fact, while there have been belated apologies for some of the scandals, no one in a senior position at CBA has actually taken personal accountability for any of the sequence of scandals that have recently beset the bank.

A detailed description of the many failures of accountability at CBA would take many thousands of words, but one scandal stands out above all others, not least because it involved the largest fine ever visited on CBA’s long-suffering shareholders. It set the scene for how the CBA board would handle future scandals, that is to obfuscate, prevaricate and litigate.

On December 23, 2009, the CBA board announced a payment of some NZ$264 million to one of New Zealand’s public service departments, New Zealand Inland Revenue.

The NZ High Court found that CBA had been using ASB Bank, its NZ subsidiary, as a laundromat through which it washed a number of dodgy transactions each year with the purpose of avoiding NZ taxes, which fed directly into CBA group profits. It was tax avoidance on an industrial scale.

It should be noted that three other major banks were also fined in a total settlement of NZ$2.2 billion (about A$1.7 billion at the time), the largest fines ever paid by Australian banks.

The banks had fought the NZ Commissioner of Inland Revenue for several years all the way to the High Court, until Justice Harrison ruled the transactions were “tax avoidance arrangement(s) entered into for a purpose of avoiding tax”.

Why such a small number of transactions? Because they were huge Interest Rate Swaps (IRS) transactions, created at the highest levels of the organisations with the purpose of turning expenses into income, a clever idea that some tax accountant had dreamed up around 1995.

During the extensive and expensive litigation, the CBA board kept maintaining that they had rock solid advice that their actions were legally watertight. But they were very wrong.

So, did anyone take responsibility for this embarrassing, unethical and expensive failure of management and corporate governance?

No board member or senior manager ever took responsibility for being found to have tried to avoid huge amounts of tax in one of the bank’s key markets. In fact the opposite, Sir Ralph Norris, who had been CEO of ASB during the wash and spin cycle, was made CEO of the CBA group in 2005.

What message does such disgraceful and ultimately unproductive behaviour send to staff?

First it says, don’t take responsibility for anything, bluff and dissemble and, if found out, never ever admit to anything. If board members refuse to be accountable for their mistakes, why should anyone else, especially if whistleblowers are treated appallingly?

And the NZ scandal was only the first of many scandals.

While CEO, Ian Narev, has expressed “disappointment” at customers being treated shabbily, no senior leader has been held directly accountable for the financial planning scandal, the CommInsure scandal, the manipulation of BBSW and Foreign Exchange benchmarks, and now the money laundering action being taken by AUSTRAC.

Making belated apologies is not taking responsibility for misconduct unless corrective actions follow. But, in CBA the scandals keep coming, as the apologies appear to have changed nothing in the organisation.

Surely someone, somewhere in the huge CBA organisation has the ethical grounding to stand up and say – “yes, we did make mistakes and, yes, we should bear the consequences, and to start the ball rolling, I resign”. Actions speak much louder than mere words.

The APRA inquiry will undoubtedly find that the bank’s “accountability framework” was deficient but unless names are revealed, its conclusions will be suspect.

However, it is not up to the panel to name and shame, but to convince the senior management of CBA that only true accountability will restore trust in the bank and that someone has to step up and take responsibility for their actions and inaction, otherwise staff will never know the right thing to do.

The CBA inquiry panel is due to hand down an interim report by December but by then we should know if the inquiry has any teeth by any admissions of accountability coming from the CBA board and management. But don’t hold your breath!

Author: Pat McConnell, Honorary Fellow, Macquarie University Applied Finance Centre, Macquarie University