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Government backs APRA CBA inquiry – taking action now

I welcome today’s (28/8/17) announcement by the Australian Prudential Regulation Authority (APRA) to commence an independent prudential inquiry that would focus on the governance, culture and accountability frameworks and practices within the Commonwealth Bank of Australia (CBA).

This is a further example of the “take action now” approach to our banks, supported and sponsored by the Turnbull Government, and follows ASIC commencing its investigation into whether the CBA board complied with both continuous disclosure laws and their licensing obligations.

Australia’s banks are well capitalised, well regulated and financially sound. However, there have been too many cases and events that have damaged their reputation and standing in the eyes of many Australians, that warrants our regulators taking action now.

In the case of CBA, more than a dozen compliance issues have arisen since 2008.  It is apparent that while the bank’s board and management have talked about the importance of culture and accountability, the continuing occurrence of these types of issues demonstrate that their actions have so far failed to meet customer and investor expectations. At the end of the day, this is the responsibility of the Board and its chair.

I met with CBA’s Chairman Catherine Livingstone AO earlier this month immediately after AUSTRAC initiated civil penalty proceedings in the Federal Court against the CBA for serious and systemic non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act.  At that meeting I indicated I would be keeping my options open with respect to government and regulatory responses. 

I have also been in regular discussions with AUSTRAC, APRA and ASIC and the regulators themselves have been in their own consultations and are taking action.  

Dramatic action and accountability to restore this trust must be the focus of the CBA’s board and management. I support the key objective of APRA’s inquiry to identify the core organisational and cultural drivers at the heart of recent issues relating to the CBA.  I fully expect the Inquiry and CBA’s response to provide the community with confidence that any shortcomings identified are promptly and adequately addressed. 

I look forward to the forthcoming announcement by APRA of the panel members and the detailed terms of reference for the inquiry. 

I note that the report will be made public and am pleased that CBA will meet the costs of the Inquiry and fully co-operate with APRA.

The Inquiry will be broad, considering whether the group’s organisational structure, governance, financial objectives, remuneration and accountability frameworks are conflicting with sound risk management and compliance outcomes.

This is an important initiative by APRA and will complement ASIC’s investigations.