Talk about pushing a former colleague under the bus.
Faced with the a grilling about the Commonwealth Bank of Australia’s (ASX: CBA) disgraceful business model of selling almost useless consumer credit card and personal loan insurance to customers, current Commonwealth Bank chief executive officer Matt Comyn lost no time in squarely blaming his former boss, Ian Narev.
According to Matt “new broom” Comyn, when he lobbied the boss to stop selling the useless insurance back in 2015 and 2016 he was told to “temper your sense of justice”.
In other words, it doesn’t matter if you are ripping off your customers, as long as you continue to get away with it.
The perfect insurance product
In that respect the credit card and personal loan insurance was the absolutely perfect banking product – insurance with almost no actual value other than an illusory “peace of mind” that produced yet another $150 million a year profit line for the bank.
Indeed, the Commonwealth Bank only stopped selling the insurance in March this year and is now in the process of trying to compensate 64,000 customers $15 million for credit card protection policies and pay a further $31 million to 90,000 people for loan protection products.
Mr Comyn said his most important task as chief executive officer was to pick the right leaders in the bank – something that had not happened in the past.
Chair blames past leaders too
It wasn’t just Mr Comyn who was blaming his predecessor Mr Narev for the bank’s cultural deficiencies; current chair Catherine Livingstone expressed her surprise at how willing the bank’s board had been to accept without question the word of management.
Ms Livingstone said she did not feel comfortable with assurances from executives at the bank in 2016 that they were on top of an unfolding money laundering scandal.
She acknowledged the board could have done more to follow up on the issues as three red statutory notices were issued by anti-money-laundering regulators.
Ms Livingstone – who was new to the board in November 2016 – said she had not requested copies of the three reports in question and she couldn’t recall any other directors requesting them either.
Despite an executive summary given to the board which made the seriousness of the issues clear, Commonwealth Bank was eventually sued for breaching anti-money-laundering laws more than 50,000 times by failing to report suspicious transactions on its smart ATMs.
The bank paid a record $700 million in fines for the breaches.
Mortgage brokers earning millions
In earlier evidence it was revealed that some mortgage brokers were earning staggering incomes from upfront and trailing commissions for mortgages that they brought to the Commonwealth Bank.
The commission heard that there are 1,300 brokers earning more than $1 million, with the top 200 getting around $2.5 million each and that commissions had soared in line with rapidly rising property prices.
Flat fees would have cost market share
Mr Comyn said the Commonwealth Bank was trying to move away from the commission model of broker payments to a flat fee model but had abandoned the plan last year because other banks would not have followed and Commonwealth Bank would have lost too much market share.
Moving to a flat fee would have changed the broker revenue on an average loan down from $6,627 to just $2,310 and would have allowed the bank to offer lower interest rates. In September, Mr Hayne in his interim report found out-of-control greed among banks and weak corporate cops were to blame for the nation’s financial scandals.
Since the commission’s interim report was issued suggesting reforms, more than 1,000 policy submissions had been received.
Perhaps the strongest theme to emerge from those submissions was to end the practice of paying grandfathered commission payments to financial advisers and from superannuation accounts.
The Hayne Royal Commission is set to hear from the three other large bank heads ANZ chief executive officer Shayne Elliot, Westpac’s Brian Hartzer and National Australia Bank’s Andrew Thorburn before delivering its final report in February.