Day 341: 'No more apologies'
An introductory weekday newsletter from Schwartz Media. Counting the days since the banking royal commission was established.
Good afternoon and welcome to day 341.
Today in summary: Rowena Orr says the commission doesn’t want to hear any more apologies from bank bosses; CBA chief Matt Comyn admits he may be changing his thinking on bonuses, says culture will be the hardest thing to fix; and the lesson of the day is: listen to your staff when they tell you things aren’t right.
-- Charis
Current banker panic level: 😱
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Senior counsel assisting the commission, Rowena Orr, QC, has used her opening statement at today’s second-last week of hearings to remind the banks the commission isn’t interested in more apology tours.
"The purpose of this round of hearings is not to hear further apologies or expressions of regret. We do not think that will assist you in fulfilling your task.”
Orr said rather than go over old ground, the next two weeks of hearings would focus on understanding why misconduct has occurred and what can be done to prevent it in future.
She highlighted ten examples of agreement from the thousands of submissions received by the commission, including ending grandfathered commission payments to financial advisers, the need to simplify current laws and regulations, and clarification of the duty owed to clients by mortgage brokers.
The live blogs are still live, choose your flavour:
ABC | AFR | The Age | The Australian | The GuardianCBA chief Matt Comyn has told the royal commission the bank pursued “financial gain at the expense of customer interest", and that changing the culture of the organisation would be the hardest cause of misconduct to fix.
A large part of this morning’s questioning of Comyn centred on bonuses and incentive payments. When pushed by the evidence, Comyn admitted that although he hasn’t yet moved the bank away from “variable remuneration”, bonuses came with “inherent risks”, and he was “shifting on the spectrum” away from incentives.
The bank removed incentives for tellers in late 2017, and Comyn said there had been no deterioration in their performance since.
"There's a very strong sense of customer in our customer facing team, who actually take a lot of pride in doing a good job for their customers, and having their performance solely evaluated on their advocacy as opposed to an element of financial performance, I would say certainly for many, if not the majority, would be their preference."
The commission also interrogated the cost of mortgage brokers, who still originate around 40% of CBA’s home loans, with commissions of up to A$2.5 million a year for top earners. Comyn admitted the bank was contemplating publicly advocating for a market where customers would pay a flat fee for mortgage advice, as they do in the Netherlands. But he said there were concerns others in the industry wouldn’t follow, and so he preferred to wait for regulation.
“I thought it would be very difficult to change the - the commission structure unless there was at least regulatory guidance, which I - which I would have thought the industry would then follow. But absent that, I thought it would be very challenging.”
Legislation relaxing the restriction on ownership of banks and insurers has passed Parliament. The changes lift the foreign ownership cap from 15 to 20%. They also enable owners of domestically incorporated companies to hold more than 20% of the institution’s shares, as long as the entity has assets of less than A$200 million.
Assistant Treasurer Stuart Robert said:
“These changes significantly reduce barriers to entry that are preventing the innovation that our financial system needs, while still prioritising the safety of consumers and the broader financial system.”
Today’s burn prize: former CBA chief Ian Narev
🔥🔥🔥
“I raised the concerns. He had a differing view.”
CBA chief Matt Comyn tells the royal commission he raised concerns about loan protection insurance and target-based sales practices three times with former chief executive Ian Narev, but nothing happened.
The Commentariat
Today’s hearings have highlighted it wasn’t just external voices that senior bankers at CBA didn’t listen to, writes the AFR’s Chanticleer. The bank’s general manager of compliance “felt aggrieved that the board and the executive committee did not adequately challenge each other and hold each other accountable".
“It was a disturbing trio of insights from inside CBA. It showed the problems that have been so brutally exposed were known inside the bank, but the people paid to raise them and fix them were not listened to.”
Pressure on the major banks stemming from the royal commission could bring an end to the four pillars policy, writes Macquarie University Visiting Fellow Pat McConnell.
“The end of the four pillars policy needn’t mean the end of competition. Smaller, cheaper competitors will be doing more of what the big four did.”
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