In the latest hearing of Hayne Royal Commission, Commonwealth’s Chief Executive Officer Matt Comyn admitted that the Bank has been stuck in the “escalating cycle of funding remediation, resolution and rectification” as it has not adequately invested in the operations and compliance system.
Mr. Comyn was the first big four bank CEO to appear before the banking royal commission on Monday. He said that it’s in the culture to not learn from issues of misconduct that have happened in the past as the Bank was more focused on the wrong doings including performance improvement through “collaboration” instead of giving core attention to its customers.
Not learning from mistakes is the reason for which bank has got into a phase of ongoing remediation without critically understanding the root cause in each of those matters, added Mr. Comyn.
The parts of interim report read that instead of prevention and simplification, the Bank was caught in an escalating cycle of funding remediation, resolution and rectification. Further, putting forward the AUSTRAC debacle where the Bank has breached money laundering and terrorism funding laws thousands of times, Mr. Comyn stated that weak management of operations and compliance risk has been the major reason for failure.
Meanwhile, among the top executives, Commonwealth’s Private Marianne Perkovic responded to Mr. Comyn letter to reflect her take on culture, governance, accountability and AUSTRAC debacle at the Bank. She said the bank has been too reactive and has just acted in response to the regulatory, compliance or media issues. She added that because of not calling out the unacceptable behaviors of Bank, she has let her clients, people and community down.
In the opening statement of the hearing, Senior counsel assisting the commission, Rowena Orr, QC, said that the purpose of this round of hearings is not to hear further apologies or expressions of regret, rather the focus is on understanding why misconduct has occurred and what can be done to prevent future misconduct.
Commonwealth Bank of Australia told the royal commission that structural separation of Bank from product creation and sale would have adverse impact on its financial advice business, increase the cost of financial advisory services, and can have many other fortuitous consequences. Along with this, the bank does not seem to go along with the several suggestions made in Hayne’s interim report that included tighter obligation for lenders, the use of controversial borrower benchmark known as the household expenditure measure, among others.
In the next rounds of hearing, the royal commission into banking sector is to touch the root causes of misconduct, regulatory reforms and behaviors falling below the community standards.
As CEO Matt Comyn acknowledged that Bank is caught in the “escalating cycle” of repaying its customers, the CBA’s stock fell down. At the time of writing, 19 November 2018 (2:51 PM AEST), CBA’s share price is down by 0.653% or $0.450 to trade at $68.450. Moreover, the stock is currently trading at a PE of 12.900 x with market capitalization of $121.97 billion. Over the past one year, the stock of Commonwealth Bank of Australia (ASX: CBA) has witnessed a negative performance change of 14.75%.
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