The Australian Prudential Regulation Authority will establish an independent inquiry into the Commonwealth Bank, following a series of scandals which have called the integrity of Australia's largest bank into question.
The inquiry, conducted by an APRA-appointed independent panel, will focus on CBA's governance, culture and accountability frameworks, including a consideration of the group's organisational structure, governance, financial objectives, remuneration and accountability frameworks.
APRA chairman Wayne Byres said the decision to initiate a prudential inquiry followed a number of issues which have raised concerns regarding the frameworks and practices, and have damaged the bank's reputation and public standing.
"The Australian community's trust in the banking system has been damaged in recent years, and CBA in particular has been negatively impacted by a number of issues that have affected the reputation of the bank," Byres said.
"Given its position in the Australian financial system, it is critical that community trust is strengthened. A key objective of the inquiry will be to provide CBA with a set of recommendations for organisation and cultural change, where that is identified as being necessary."
A public report will be due around six months from the formal commencement of the inquiry, and costs will be met by CBA.
In a statement, CBA chair Catherine Livingstone acknowledged that recent events have weakened the public's trust in the bank and voiced its support for the inquiry.
"We welcome this opportunity for independent parties to review the work we have already undertaken and advise on what more we can do," Livingstone said.
"APRA's oversight of this inquiry will ensure the independence and transparency needed to reassure all our stakeholders."
"We are confident that our 50,000 people come to work each day to give their best, for the benefit of our customers. At the same time, we know that our mistakes have hurt our reputation," outgoing chief executive Ian Narven added.
Federal treasure Scott Morrison has thrown his support behind APRA saying the CBA board failed to meet customer and investor expectations.
"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," Morrison said.
The announcement comes on the heels of potential shareholder class action launched by lawyers Maurice Blackburn with litigation funder IMF Bentham bank last week.
Maurice Blackburn national head of class actions Andrew Watson alleged CBA shareholders suffered a significant share price drop in light of AUSTRAC's legal proceedings against the bank.
"The AUSTRAC allegations are extensive and it is astounding that the market would not be advised of such serious and repeated breaches as soon as the company became aware of them," Watson said.
"Instead the CBA has said that its board was aware of the breaches in the second half of 2015 but chose to say nothing to the ASX until 4 August 2017."
CBA is also fighting a Federal Court action launched by AUSTRAC which accuses the bank of breaking anti-money laundering regulations on nearly 54,000 occasions.
In addition, ASIC is investigating CBA to determine whether its directors met continuous disclosure obligations to its investors.
A survey from the Australian Bankers' Association released today shows low levels of public trust, confidence and transparency in the banking industry, with 70% placing their level of trust at neutral or low.This page was first published by: http://www.financialstandard.com.au
Author: EMMA RAPAPORT