It feels very counter-intuitive that the Commonwealth Bank, which has the overhaul of operational risk as the centrepiece of its strategy, has just made a particularly risky move.
Elevating the head of retail operatons Matt Comyn to replace Ian Narev as chief executive of the entire bank could backfire
Those that are looking to see CBA break out of the cultural/reputational quagmire in which it has found itself will be disappointed - even shocked - that one of the bank's establishment executives will now be charged with fixing the problems - some of which occurred under his watch.
At 42, Comyn is already a 20-year CBA veteran - having been raised in its culture. But more importantly, for the past five years he's been responsible for the retail bank, part of which is the focus of the actions taken by Austrac on money laundering.
New CBA chief executive Matt Comyn will be tasked with restoring the bank's reputation. Photo: Louie Douvis
Some time this week the initial report from the Australian Prudential Regulation Authority's review of the bank’s culture and governance will be released - and its findings due in April may not show Comyn in a good light.
Even if he emerges relatively unscathed from the regulator’s examination it is hard to believe he won’t suffer damage as this year’s Royal Commission moves into full swing.
The appointment of a new chief executive had everything to do with restoring CBA’s battered reputation. It was an opportunity for the board to install fresh blood; to inject a new and improved culture using an outsider that wasn’t around amid mistakes of the past.
Narev didn’t have to leave because of the financial performance of the bank. His record on total shareholder return, over the six years he ran CBA, was far from shabby.
On customer service and innovation the CBA is ahead of its peers.
Comyn, who is close to Narev, has also done a good job with the retail bank. Had it not been for the various calamities - most significant of which is the Austrac money laundering debacle -Comyn would have been an understandable choice. His appointment will allow for a smooth transition, he is well known to investors and has been a major architect in CBA’s successful strategy in the retail bank.
But he is an insider, when an outsider is what was needed.
Comyn is in a pole position to continue to deal with the increasingly competitive landscape in banking and the current stagnant growth but the reputational and legal issues will be a far larger challenge.
Comyn took shared responsibility for some of these issues when he fronted investors and the media on Monday following the announcement of his appointment after a unanimous vote for him from the board.
Narev resigned last year following a series of scandals relating to its insurance arm, dubious financial advice and charges relating to the systematic break down of its anti-money laundering and counter-terrorism funding (AMLCTF) monitoring and reporting.
CBA chairman Catherine Livingstone will no doubt be accused of tone deafness to the expectations that CBA needed fresh blood for the chief executive role.
Questions will be asked about why she failed to take the opportunity to provide a reputational circuit breaker.
But she also faced a dilemma.
The board had to ratchet down the pay scale for the new chief executive - despite the fact the bank is a very large and complex business.
Well-credentialed international bankers may not have been willing to take a cut in remuneration - particularly when faced with the prospect of the distraction from years of intense scrutiny from regulators, the courts and a royal commission.
Livingstone was aware of the community expectations that executives receive excessive remuneration and that the reputationally challenged CBA could ill-afford to be seen as being generous to its executives.
A list of strong candidates from other Australian banks had been speculated as being in contention.
But from the board’s perspective Comyn best met the criteria they were looking for in a leader and his appointment clearly had the approval of Narev who has fostered his career.
Investors also didn’t appear fazed by the announcement. CBA’s share price edged up slightly in Monday morning trade.
One can only presume that the CBA board is confident that Comyn’s nose won’t be too bloodied by APRA’s report, the Austrac court case or the royal commission.
Nothing is certain. It could be a very short honeymoon.This article was first published by: http://www.smh.com.auAuthor: Elizabeth Knight