Australian bank to undergo investigation by regulator

Gladys Abbott
August 31, 2017

Treasurer Scott Morrison believes it is appropriate the banking regulator investigates the culture of Australia's largest bank rather than pursuing Labor's call for an sector-wide royal commission.

The Commonwealth Bank's governance and accountability practices will be examined by an independent inquiry after a number of recent incidents have raised concerns around the banks' culture.

The Australian reports Mr Morrison will ask parliament to approve new laws giving the Australian Prudential Regulation Authority the power to cap salaries, delay bonuses and drive directors out of the industry if they are guilty of wrongdoing.

"The overarching goal of the prudential inquiry is to identify any core organisational and cultural drivers at the heart of these issues and to provide the community with confidence that any shortcomings identified are promptly and adequately addressed", he said.

Earlier this month, it was revealed that the federal government's financial intelligence agency Austrac is to sue CBA in federal court over a massive series of breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act, described by Austrac as "serious and systemic noncompliance" with the act.

'Given its position in the Australian financial system, it is critical that community trust is strengthened'.

CBA chair Catherine Livingston welcomed the APRA inquiry and said recent events had "weakened the community's trust". We have been working hard to strengthen trust, and will continue to do so.

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"We welcome this opportunity for independent parties to review the work we have already undertaken and advise on what more we can do".

Commonwealth Bank, whose chief executive Ian Narev last week announced his retirement, said it supports the inquiry.

'At the same time, we know that our mistakes have hurt our reputation'.

"APRA's oversight of this inquiry will ensure the independence and transparency needed to reassure all our stakeholders".

In a communication following the announcement that APRA was launching an investigation into the bank, Morningstar analysts advised investors to "hold" their CBA shares and put a positive spin on the development.

The probe into CBA, the largest company listed on the Australian Securities Exchange, is expected to run for six months and will be funded by the bank.

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