CBA’s board and senior executives are being grilled about the bank’s culture and risk management

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  • The inquiry is digging through 10,000 internal bank documents searching for “shortcomings”
  • 80 past and present board members, the CEO and senior executives are being interviewed
  • CBA says: “We recognise there is work still to be done to strengthen community trust in us.”
  • The Prudential Inquiry into the Commonwealth Bank has dug into 10,000 internal documents and interviewed board directors, the CEO, senior executives and staff as it looks for shortcomings in governance, culture and accountability at Australia’s biggest bank.

    APRA (Australian Prudential Regulation Authority) today released a progress report of the inquiry into the Commonwealth, launched in August last year after concerns about damage to the bank’s reputation and public standing, but didn’t reveal any findings.

    “Issues of governance, culture and accountability in a large financial institution are complex and interwoven, and the panel does not consider it appropriate to draw conclusions, even preliminary ones, before this work is completed,” the progress report says.

    The inquiry is being run by a panel: former APRA chair Dr John Laker, former consumer watchdog ACCC chair Professor Graeme Samuel and company director Jillian Broadbent. The panel is due to provide a final report to APRA by the end of April.

    The panel has collected 10,000 internal bank documents and has conducted 60 of a planned 80 interviews with board directors, the CEO, CFO, other senior executives, plus senior management, including Executive General Managers and General Managers, and former board directors and executive staff.

    Interviews have been structured for general fact finding but also to understand the organisational and cultural drivers and whether particular factors are conflicting with risk management and compliance.

    The focus:

      Governance: The way in which decisions are made, including how financial objectives, values and strategic priorities impact on the decision-making process, and how decisions, once made, are implemented.

      Culture: The norms of behaviour for individuals and groups hat determine the collective ability to identify, understand, openly discuss, escalate and act on the organisation’s current and future challenges and risks.

      Accountability: The way in which staff, both individually and collectively, fulfill their responsibilities and the consequences of not fulfilling these responsibilities.

    The inquiry is also digging into the bank’s organisational structure and governance, its risk management and compliance framework, its remuneration and accountability
    frameworks, its financial objectives, and its framework for identification, escalation and addressing matters of concern.

    Eleven focus groups have been held, involving more than 100 staff at management level.

    And an online staff survey has been developed and made available to nearly 10,000 staff. The survey, which draws on similar polls overseas, contains questions designed to understand the bank’s culture and its approach to risk management.

    Commonwealth Bank chair Catherine Livingstone, said today: “We have previously stated our full support for the Prudential inquiry and we recognise there is work still to be done to strengthen community trust in us.

    “We’ve acknowledged there are aspects of our culture where we could improve and we have been focussed on upgrading our performance in the areas of governance, operating procedures and regulatory compliance.”

    The panel hasn’t been asked to make specific recommendations on matters that are the subject of legal proceedings, regulatory actions by other regulators, or customers’ individual cases.

    The bank currently faces court action over alleged breaches of anti-money laundering regulations. It is also accused of unconscionable conduct and market manipulation by rigging the bank bill swap reference rate.

    The major banks are facing a regulatory storm in 2018, with 15 government reviews and inquiries.

    The banks also this week got in their initial responses to the Royal Commission into misconduct in the banking, superannuation and financial services industry. That has another year to run.

    And next week the Commonwealth is due to post its half year results. This should give some indication of the impact of the money laundering allegations on operating costs.