National Australia Bank has faced a storm of criticism in Parliament after failing to discipline and instead rewarding a senior banking executive who was in charge of its troubled wealth division.
NAB chief executive Andrew Thorburn was the first of the big four banking chiefs to face questions by the Parliament's economics committee as part of the Turnbull's government's attempt to make banks answerable for their decisions and practices.
From the opening questions Mr Thorburn came under sustained attack with committee chairman Liberal Party MP David Coleman questioning the remuneration and disciplining of NAB's head of wealth Andrew Hagger in the wake of problems in that part of the bank.
Mr Hagger was head of the wealth division when in February it came to light that the bank was forced to repay $36.5 million in compensation after ASIC found 220,000 corporate superannuation accounts had been overcharged.
"A sensible observer would say he's the boss of this division ... and ultimately in order to improve in these matters it seems to me that the buck needs to stop with senior executives," Mr Coleman said.
Under questioning, Mr Thorburn revealed Mr Hagger received 120 per cent of his bonus that year despite the scandal. "We see that the bank has paid 120 per cent of the potential bonus to the leader of the wealth management division where virtually all of the issues that have concerned this committee about National Australia Bank have taken place," Mr Coleman said.
Mr Thorburn said many of the problems in the division already existed or were instigated before Mr Hagger even took the role. The overcharging occurred between September 2012 and October 2016. Mr Hagger began as head of wealth management in April 2013.
National Australia Bank chief executive Andrew Thorburn (right) and chief operating officer Antony Cahill have faced a testy hearing at Parliament. Photo: Alex Ellinghausen
"Mr Hagger has actually led this business well, lifted the standards and actually been part of the reason why I can sit before you today feeling a lot more confident that the processes, the standards in the wealth management in our risk business are much higher than ever before," he said.
"He came into a division that had real difficulties and he has been the leader who has raised issues, lifted standards, introduced new initiatives."
After the hearing, Labor's spokeswoman for financial services Katy Gallagher released a statement reiterating Labor's commitment to a banking royal commission.
"Committee members asked direct questions, expecting direct answers but all that was provided in response was waffle and attempts to convince customers that all is well with the bank's culture," she said.
"He obviously hasn't been fired, he is still in the job".
Committee chairman David Coleman
Mr Thorburn was in the hot seat for more than three hours where he was quizzed on a range section of topics, from credit card debt to NAB's failure to implement recommendations from government inquiries.
He came under fire for NAB's actions regarding Graeme Cowper, a Sydney financial adviser exposed by Fairfax Media in 2015 for giving inappropriate advice to a number of clients. Mr Cowper's actions led to compensation of around $7 million to more than 100 clients.
Mr Thorburn was asked why Mr Cowper was allowed to resign, as well as being being paid out and given a letter of recommendation.
"You allowed him to resign and gave him a payout, I also understand you wrote him a nice letter. This is a man you admit breached your code of conduct, you allowed him to resign and gave him money – are you living in the real world?" Labor MP Matt Thistlethwaite said.
Mr Thorburn wouldn't be drawn on the specifics of Mr Cowper's case, citing legal issues, but said standards had changed since 2010.
"Because of the litigious nature of this I don't want to comment any more and I can't," he said
"As I sit here today we have far more scrutiny, far more scrutiny of the advice our planners are giving."
Over the next week, the standing committee on economics will hear evidence from the chief of executives from Australia's big four banks, as part of a government effort to increase accountability for the sector.
Prime Minister Malcolm Turnbull announced the committee hearings last August after the major banks failed to pass on the Reserve Bank's 0.25 per cent rate cut to mortgage holders in full. He said at the time the hearings would give the banks a chance to explain their actions directly to the Australian public.
The hearings come as Labor continues its push for a royal commission into the banking sector. Support for a banking royal commission remains strong with 64 per cent support, according to a Newspoll last month.
Mr Turnbull believes a royal commission is not necessary and that the hearings, which have become a regular fixture in Canberra, will increase transparency on the decision-making inside the bank
This article was first published by http://www.theage.com.au
Author: Mario Christodoulou