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APRA inquiry may trigger CBA management shake-up

APRA's probe 'quite serious' for CBA The fallout from the Commonwealth Bank of Australia's money-laundering scandal has widened, with the banking regulator launching an inquiry into the lender's culture and governance. APRA's probe 'quite serious' for CBA The fallout from the Commonwealth Bank of Australia's money-laundering scandal has widened, with the banking regulator launching an inquiry into the lender's culture and governance.

The Commonwealth Bank is tipped to face further upheaval in its senior management ranks after the banking regulator's move to put its organisational structure under the microscope.

The Australian Prudential Regulation Authority's probe into CBA could also be a further dampener on the lending giant's share price, which has already lost 8.7 per cent since an alleged money laundering compliance scandal came to light, analysts said.

APRA on Monday announced a prudential inquiry into CBA and its governance, culture and accountability frameworks, after a run of scandals at the country's biggest bank, including recent allegations of deep failings in anti-money laundering compliance.

Banking experts said they could not recall such action from APRA, which normally operates behind the scenes.

They predicted it could lead to more changes among senior executive staff, alongside the departure of chief executive Ian Narev, who the bank this month said would leave by the end of this financial year. 

Velocity Trade banking analyst Brett Le Mesurier said the inquiry could lead to senior management changes in CBA, noting that one of the key areas in APRA's sights was the bank's organisational structure.

"Heads may roll as a consequence of this," Mr Le Mesurier said, adding that the inquiry may also weigh on CBA's share price.

The fact APRA was launching such an inquiry was a sign the regulator recognised CBA had been embroiled to a greater extent than other banks in cultural problems weighing on the banking industry in recent years.

CBA chief executive Ian Narev conceded the bank's reputation had been hit by mistakes. Photo: Peter Braig

"It hasn't been limited to the CBA, but they seem to be overweight on drama," Mr Le Mesurier said.

Bell Potter banking analyst TS Lim also said APRA's probe would likely result in changes to the bank's management systems, and potentially some managers. He predicted the stock would move "sideways" because of the "noise"  created by the AUSTRAC allegations.

"This inquiry is just going to dig deeper and deeper, and I think there's going to be a bit of a shake-up," he said. "It's early days, but it doesn't look good."

In contrast, White Funds Management managing director Angus Gluskie said the review was unlikely to have a major impact on CBA shares as an investment, despite the high level of public interest in the issue.

They seem to be overweight on drama.
Brett Le Mesurier

"It's not making me question my investment opinion on the much more significant matters of how they are running the bank," Mr Gluskie said.

Mr Narev conceded CBA's reputation had been hit by mistakes. He said APRA's probe would likely look at issues including the overlapping lines of responsibility within the bank's internal structure, and how CBA could improve "the specificity of accountability".

APRA's public inquiry is the latest example of fallout for CBA since financial intelligence agency AUSTRAC this month claimed CBA breached anti-money laundering laws on a massive scale.

These allegations have also triggered an investigation from the corporate watchdog, and the bank's handling of the issue may lead to a potential class action from shareholders.

CBA on Monday lost 1.3 per cent, a smaller fall than Westpac. But CBA's share price has lagged peers since August 3, when AUSTRAC alleged CBA failed to comply with anti-money laundering laws.

Over this period, CBA has lost 8.7 per cent, compared with a 2.6 per cent decline in the ASX 200 banks index. However, the fall in CBA's share price has been accentuated because the cut-off date for receiving the next CBA dividend has also passed during this time.

Standard & Poor's said CBA's credit profile was likely to weaken if APRA's review resulted in "material adverse findings" such as fines, significant brand damage, or signs of weakness in its risk management framework.

This story was first published by: http://www.smh.com.au
Aurhor: Clancy Yeates
Last modified onMonday, 04 September 2017 23:18

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