The National Australia Bank previously owned a subsidiary in Britain – the Clydesdale and Yorkshire Bank, effectively Clydesdale. When Andrew Thorburn became NAB CEO in August 2014, he soon announced an intended divestment of Clydesdale. Evan Jones
NAB’s subsidiary Clydesdale: long under the media radar
The NAB finally sold off Clydesdale in early 2016, with a “de-merging” to NAB shareholders and a partial listing.
In non-existent to spotty coverage in the Australian press over many years (usually in reporting of NAB’s financial results), Clydesdale has been nominated as a headache for Head Office. But the reasons have rarely been pursued, and never in depth. Post 2007, the troubles have crudely been attributed, echoing bank spokespersons, to the “difficult market environment” prevailing in Britain brought on by the global financial crisis (GFC).
The tenor of the commentary has been to emphasise the dangers of Clydesdale’s parlous operations for the NAB group’s profits, shareholder returns and share price. The victims — customers and bank staff — have remained in a shadow.
Ongoing neglect of Clydesdale by the Australian press proved impossible in the wake of the publication of a report by the Treasury Committee of the House of Commons — one that received widespread attention in the British media. The report, Conduct and Competition Lending in SME Lending, was published on 10 March 2015.
The report has a broad focus, on the difficulties of the SME sector (including farming) acquiring suitable finance facilities — a long term dilemna. But the report also devotes attention to a particularly pernicious form of SME lending involving extant complex loan facilities. It was the latter dimension and its adverse aftermath of destitute and foreclosed businesses and farms that provided the initial motivation for the Committee inquiry to be set up.
The NAB comes in for specific criticism as a bank that engaged in unethical practices, over an extended period, and which had consistently denied justice to its victims with tightly controlled investigations and paltry compensation offers.
On the latter, the Committee report notes:
‘160. However, Clydesdale’s review [of interest rate hedging products, IRHPs, under the rubric of Tailored Business Loans, TBLs] excluded fixed rate products. This represents 80 per cent of all TBL sales [EJ: 74 per cent?]. Customers with fixed rate products can complain to the bank through its usual internal complaints process. Clydesdale told us that this exclusion was on the grounds that there was no equivalent product within the [Financial Conduct Authority] review [of regulated loan products].
161. The lack of public oversight, minimal transparency and limited coverage of the scheme mean that the Committee cannot be confident that Clydesdale’s separate internal review will deliver outcomes equivalent to the FCA review on which it is intended to be based. If Clydesdale’s aim is to build public trust in its actions, it should address all three of these problems.’
The standout local articles on the imbroglio are from Fairfax columnist Adele Ferguson, ‘NAB’s UK headache becomes a migraine’, Australian Financial Review, 16 March 2015, and ‘National Australia Bank's “Death Star” destroyed dreams’, The Age, 21 March 2015. In the latter, the stories of two Clydesdale victims are briefly recounted.
Media coverage returns to being spotty. Out of the blue, in 2017, Australian readers discover that the NAB is facing a potential class action from sometime Clydesdale borrowers regarding TBLs — this from Adele Ferguson in July 2017, and from Clancy Yeates in December 2017.
Clydesdale’s problems were particularly manifest in three areas — the fixed interest swap facilities (the bulk of TBLs), the “payment protection insurance” (PPI) scandal (shared across the British banking sector), and the aggressive move south beyond Scotland and Yorkshire.
NAB senior executives in collective denial
In April 2014, NAB CEO Cameron Clyne announced that he would retire at the end of July. Having been in the job since January 2009, supposedly committing himself “100 per cent”, Clyne claimed that he was retiring to spend more time with his wife and family (no kidding). Clyne proved himself not up to the top job for which he was admirably remunerated.
In May, regarding the Clydesdale fiasco, Clyne (Michael Bennett, ‘Clyne keeps faith in UK sell-off’, The Australian, 9 May 2014):
‘… said the conduct problems would not deter potential buyers of its British arm, given the problem was industry-wide and not new. …
Mr Clyne has opted to work through the challenges rather than take a hefty loss through a fire sale. “It’s a known issue, an industry issue, so I don’t think it’s necessarily a factor in whether or not people are interested in acquiring Clydesdale,” he said of the conduct woes.’
The problem was not new, but problem it remained for lack of attention. Certainly the PPI scandal was industry-wide — but why did Clydesdale go along with it? Clydesdale’s involvement in fixed interest embedded swap loans was bank-specific — massive in scope relative to its loan book. Clyne was in denial.
Clyne spent his entire time in the top job ignoring not merely Clydesdale’s festering problems but the plaints of domestic victims. He treated the Code of Banking Practice as if it didn’t exist. He allowed staff to abuse the Farm Debt Mediation process. He hid behind an expensive PR apparatus that also included a hypocritical substance-less Aboriginal community support program.
As I keep repeating, I wrote to Clyne in July 2010, citing a litany of stories of NAB victims who had contacted me, desperate for a sympathetic ear. In the letter I claimed:
‘In my view there is a good argument for a strategic reorientation of reconciliation towards these people. Compensation is in order. What is several hundred million dollars (perhaps even a billion) if the bank were to clean the slate and build a new reputation on competence and rectitude? The bank would be home clear indefinitely for dominance in the SME/family farmer market. Whatever the immediate cost, there are ready savings and significant long term profits to be had.’
Clyne replied, via a flunkey, that I should bugger off. In retrospect I dramatically under-estimated the likely clean-up bill. Clyne may have had a better idea of the real prohibitive cost of the NAB genuinely committing itself to its long term motto — “more give less take”. Clyne chose to get out rather than face the music.
Clyne excelled himself by leading a delegation of Australian business “leaders” in a visit to Israel, becoming willing pawns in yet another PR stunt by the Australia Israel Chamber of Commerce, at precisely the time when the IDF was massacring Palestinians in the concentration camp that is Gaza. Clyne, and the NAB in general, showed no remorse. This is the kind of action that one would expect from a company long accustomed to lacking both the requisite intelligence and basic morality amongst its senior ranks.
After the March 2015 UK Parliamentary Committee report came out, the new NAB CEO Andrew Thorburn (in office from August 2014) acknowledged that he had been exposed to it and that the bank would respond in due course. It hasn’t.
‘In the face of all of this. It would seem bad banking is the norm. Not so, says Andrew Thorburn.
"Do I think we have systemic issues in NAB? No I don't. Do I believe we need to get better at processes, automation and handling customer complaints better and have simpler products and services? Yes I do. We have a complex large institution and we do a lot of things right... banking still to me is still an honourable profession. We do so many good things."’
Comprehensive head in the sand, wilful denial.
The NAB’s Chief Financial Officer Craig Drummond (ex-Bank of America Australia and Goldman Sachs JB Were) was later quoted (Richard Gluyas, ‘How NAB spread itself too thin’, The Australian, 25 March 2015):
‘… there was “fundamentally no new news” in the committee’s report. “Obviously we take the report seriously, but there was nothing in there that shocked us,” he said.’
So we know all about our long term bastardry — so what?
A month later, this (Ferguson, ‘More questions over NAB culture after huge Clydesdale fine’, 16 April 2015):
‘The record fine of £20 million ($38.8 million) imposed by Britain's Financial Conduct Authority (FCA) found "serious failings" in its complaints processes for payment protection insurance (PPIs). …
The FCA found problems with the bank's complaints handling process in relation to PPI. It found the bank's complaint handlers failed to properly assess whether the product was suitable for the customer. It also identified a complaints team that deliberately misled the Financial Ombudsman between 2011 and July 2013.
The upshot, according to the FCA, is that more than 70 per cent of customer complaints, and there were about 140,000 of them in total, might have been either unfairly rejected or given "inadequate redress". This is a polite way of saying more than 90,000 people could have been diddled. …’
NAB's total provisions for PPI compensation currently sit at £806 million, of which £291 million has been paid out. With a review of previous policies rejected, it could well blow out.’
Move along now, nothing to see here.
Yet a further month later, with Thorburn actively planning the divestment of Clydesdale (Clancy Yeates, ‘NAB seeks $5.5bn to fund exit from Clydesdale and Yorkshire’, 7 May 2015), he claims:
‘But when we looked at the economics of [divestment], despite having the £1.7 billion [capital provision enforced by the UK regulator], the economics still favoured moving forward. One of the biggest risks they've got is conduct risk, as all banks do in that market, and essentially we've taken that issue off the table for investors and for the bank.’
Well no. Thorburn hadn’t taken the issue off the table at all. Tell that to the victims.
Clydesdale’s dysfunctionality a product of Head Office dysfunctionality
The seeds that sowed Clydesdale as a “problem” bank go back at least to 2001. But the problem is cemented from the beginning in the late 1980s. The evolution of the strategies and culture at NAB’s Head Office in Melbourne provide an important backdrop.
During the 1980s and 1990s, under Neil “Nobby” Clark (1985-90) and Don Argus (1990-99), the NAB engaged in aggressive expansion. The NAB moved into New Zealand. The NAB also acquired the Glascow-based Clydesdale Bank in 1987 (along with the Northern Bank in Ireland, those branches rebranded as National Irish Bank, and Northern Bank). The NAB acquired Yorkshire Bank in 1990, subsumed into Clydesdale in 2005.
By the early 1990s, with the other three major banks hobbled by the aftermath of their greater involvement in “foreign currency loans” lending, the NAB succumbed to hubris. CEO Argus lobbied aggressively to overturn Australia’s “four pillars” policy, which prevented any merger/takeovers between the four major banks. Argus was unsuccessful, and the NAB’s overseas acquisitions became more important for the NAB’s expansionist ambitions. Longstanding employee Frank Cicutto replaced Argus as CEO in 1999, but he carried on the uncritical market share pursuit of his predecessors.
One action of the NAB under Cicutto was the introduction into the UK subsidiaries in 2001 of the fixed interest rate with swap facility for SMEs/farmers. There was no reporting of this development in the Australian press.
The move appears to have been a byproduct of the ambition of the NAB to become an allfinanz institution — the then current “name of the game”.
The NAB becomes allfinanz — moves into unchartered territory
A key step was the acquisition of the MLC insurance company in June 2000, through which the NAB moved into “financial advice” and “wealth management”. The NAB’s November 2001 announcement to the Australian Stock Exchange notes: “In Great Britain and Ireland, the personal financial services segments were restructured in preparation for the impending launch of the MLC-based wealth management offering.”
At the same time, the bank was pushing “risk management” advice and “products”. The ASX announcement notes:
‘The Groups (sic) business customer franchises were strengthened in all regions through innovative product and service offerings. In Australia a key priority was to leverage MLCs superior superannuation capabilities into B&PFS [Business and Personal Financial Services] large customer base. The Tailored Business Loan, a package of treasury risk management tools and debt sold through the Groups Risk Management Specialists, proved successful in all regions. …
The [Wholesale Financial Services] Division continued to focus on providing clients with innovative risk management advice and execution in foreign exchange, interest rates and commodities. Sustained volatility in foreign exchange and interest rate markets during the year resulted in strong sales of risk management products, especially to business markets clients in Australia, New Zealand, Great Brain and Ireland, as well as solid risk management income.’
The sophisticated facilities developed for corporate and institutional investors were thus being pushed across into the SME/farmer domain. The bank spiel says “increase the range of options”; the detached observer sees “an increase in the range of risks” — the latter to be foisted on the customer.
“Pride goeth before destruction, and an haughty spirit before a fall”, says the King James version of the Good Book.
During the late 1990s and early 2000s, the NAB brought on itself, in its subsidiaries and at head office, a series of catastrophes with substantial adverse financial implications. The crises were fuelled by unchecked hubris, systemic incompetence and unmediated corrupt practices. They are outlined in my ‘Illusion and Reality at the National Australia Bank’, October 2010, and ‘Illusion and Reality at the National Australia Bank Part II’, July 2011. They are summarised briefly in an article I wrote for US site Counterpunch in December 2007 after the NAB bought the mid-western US bank, Great Western Bancorporation.
There is a curious dimension to this period of transition. An ABC radio program in January 2004 noted:
‘… the focus is now squarely on risk management under Frank Cicutto — the Chief Executive who upped the risk profile of the bank in the pursuit of higher profits, the Chief Executive who sidelined managers regarded as conservative. One of those shifted was Steve Targett. Once touted as a successor to Don Argus as Chief Executive, he was instead shunted off to a London outpost of NAB's empire …’
Targett publically questioned Cicutto’s hiring of known aggressive currency traders. Targett, a derivatives expert, was then head of the bank’s Wholesale Financial Services Division. Did Targett support the initial extension of swap-linked facilities into SME lending? When he was “shunted off to a London outpost”, did he support the active pushing of such facilities in the NAB’s British and Irish subsidiaries which he headed? It is peculiar that someone labeled as a conservative regarding his employer’s risky strategies should be at the helm of a Division and then a subsidiary which were at the centre of the extension of risky facilities.
Peculiarly, it appears that the NAB pushed the swap-linked facilities to SMEs/farmers only in its European subsidiaries. It does not appear that it pushed them on to borrowers in Australia (at least not on any discernible scale), nor in its New Zealand subsidiary. This latter divergence is more notable when one confronts that the New Zealand subsidiaries of all three of the other Big 4 Australian banks were all actively pushing such facilities.
This scam desirably became the subject of investigation by New Zealand’s Commerce Commission. However, the Commission reached a derisory settlement with the ANZ, ASB (i.e. CBA) and Westpac in October 2015. An informed NZ contact claims that:
‘It was just a joke in terms of the assets that they stole from their customers! No doubt they had hedged their risk and off-loaded it via wholesale interbank markets (as per the practice during the foreign currency loans era).’
The toxic facilities
Traditional borrower facilities, personal or commercial, are subject to variable interest rates. The borrower rate varies (roughly) according to the lender’s funding costs. Some bright spark/s decided that, with the spate of sophisticated derivatives, the lender could offer the borrower a fixed (or partially fixed) interest rate (giving borrower “security” of financing costs against potentially rising rates), but with the lender’s variable costs relative to fixed returns mediated through an interest rate swap agreement (IRSA) with a third party.
Formally, the bank lender thus eliminates its risk carried by offering fixed rate loans. But the IRSA attracts a commission (why?) and a breakage fee is applicable (determined by the swap’s ‘mark to market’ saleability) if the agreement is voided prematurely. Who pays the costs associated with the IRSA?
After 2001, the NAB pushed the bulk of its loans to Clydesdale SMEs and farmers in this fixed interest rate with swap form. They were part of a larger package labeled ‘Tailored Business Loans’ (TBLs). A group set up by Clydesdale victims, the NAB Customer Support Group, outlines the facility on its website.
The NAB pushed the fixed interest swap TBLs partly because it was taking the IRSA commissions in house, thus raking in a sizeable extra sum. The breakage fee was attributed to the borrower — thus the labeling of the facility as an embedded swap (although see below).
The fixed interest swap TBLs were pushed to the borrowers with minimal information, and with no advice (indeed implicit denial) as to the potential dangers therein. Documentation developed initially for the new product was discarded for documentation that omitted key information. Flyers that were supposed to provide crucial information were not distributed to customers.
The Commons Treasury Committee, in its March 2015 report, claims:
150. Clydesdale understood that TBLs were unregulated. It created TBLs to avoid requirements imposed by the regulator [the Financial Conduct Authority] on the sale of a regulated product, IRHPs [Interest Rate Hedging Products]. It claims that this was to simplify the associated documentation, and to make the product easier for customers to understand. The use of TBLs has left regulators powerless to enforce compensation for customers to whom products were mis-sold, as they have done with IRHPs. Clydesdale created a product that retained the risk and complexities of the regulated product, but had none of the safeguards.
Comes the GFC in Britain. Interest rates plummet (after March 2009). The breakage fee is computed as a staggering percentage of the loan principal. Economic conditions have deteriorated dramatically. Business conditions are bleak, customer property has lost value, and the customer is tied in to fixed interest rates significantly higher than the prevailing rate. The prohibitive breakage fee locks the customer into this parlous, often hopeless, situation.
Clydesdale sold 11,270 TBLs between late 2001 and 2012, of which 8,370 were fixed rate swap loans.
Abhishek Sachdev of Vedanta Hedging, interviewed by Adele Ferguson in March 2015, estimated that the typical fixed rate swap borrower would have claims for overpayment of interest, the break fees, and consequent damages, summing to over £500,000. With over 8,000 such borrowers, the claims could total more than £4 billion ($7-8 billion). But Sachdev also noted:
‘… there are dozens of clever loopholes and justification within the internal review process that NAB will use to justify paying only a fraction of the actual claim value’
Clydesdale’s CEO David Thorburn (no relation to NAB CEO Andrew) and Debbie Crosbie, Executive Director, Customer Trust and Confidence (sic) National Australia Group Europe, gave evidence to the Treasury Committee on 17 June 2014. The most casual engagement with this testimony leaves one with a feeling of disgust.
One learns in this exchange (pp.2 & 5), Thorburn speaking:
‘There is no individual swap associated with these loans. It goes into a portfolio that our parent company manages, hedged in its own balance sheet.’
So the loans did not have embedded swaps, but the NAB and Clydesdale attributed break costs to the borrower as if they were. It would appear that attributed break costs are discretionary. More, the bulk of the profits on these loans (p.34) was transferred to the parent group. Clydesdale was merely the unsophisticated sales front outfit.
The NAB Customer Support Group subsequently issued its own response, 3 July 2014, to Thorburn’s misleading answers to Committee member questions. The CSG response highlights that loan officers and commission-driven NAB Treasury staffers deliberately mislead potential borrowers and Thorburn merely reproduced the patter.
The duplicity of Thorburn and Crosbie is comprehensive. The attempt to avoid criminal culpability for fraudulent selling and fraudulent misrepresentation is transparent.
There is an element in NAB senior personnel reactions that amounts to — “how was anybody to know that the GFC would turn up?”
This is a denial comparable to that by bank management in the early 1980s offerings of foreign currency loans (FCLs) to unsuspecting SMEs and farmers in Australia. Loans denominated in Swiss Francs, US Dollars or Japanese Yen were aggressively marketed to or imposed on SMEs/farmers with the drawcard of significantly lower interest rates. Who could believe, the “professionals” claimed, that the Aussie dollar (floated in December 1983) would plummet in value in1985 against major currencies, especially the Swiss Franc? Apart from Blind Freddie, professional status demanded such acumen, but insider knowledge was kept well-hidden from front line lenders. The prospect of a dollar devaluation was cynically denied as a real possibility to FCL borrowers.
Tellingly, senior NAB management under Nobby Clark knew that FCLs were a scam facility and declined to join the mad rush of the other three major banks into pushing same. Staff were advised that they were to offer FCLs only as a last resort to prevent existing customers going elsewhere.
So where is the collective memory for this essentially unforgettable period? Only several years after FCL cases are disappearing from the courts, the NAB is at the forefront of another madcap facility pushed to customers through misrepresentations, lies and silences.
Post-financial deregulation, there have been three large scale scams engineered (with subsequent attribution of all blame to the customer) by one or more of the Big 4 banks against SMH/farmer customers – the 1980s FCL scam (Westpac, CBA, ANZ), the CBA takedown of Bankwest customers after its takeover of Bankwest in late 2008, and the NAB/Clydesdale pushing of fixed interest swap TBLs. The first involved 4,500 to 5,000 borrowers, the second approximately 1,000 borrowers (some involving very large sums), and the third over 8,000 borrowers.
Numerically, the NAB/Clydesdale scam is thus the largest perpetrated against SME/farmer borrowers following financial deregulation. The FCL saga received massive media coverage, the Bankwest takedown and the Clydesdale toxic facilities near zero coverage. The vibrancy of the small business and the family farmer sector are apparently no longer newsworthy.
Change of personnel at the top; no change in the NAB’s culture
The exposure of the 2003 disastrous speculative trades employed by the NAB’s “rogue” currency trading desk lead to the resignations in February 2004 of CEO Cicutto and Board Chairman Charles Allen. Before resigning, Allen appointed Scot John Stewart as replacement CEO. It was a rushed decision, based on Stewart’s claimed “insider” status.
Stewart had been hired by Cicutto only several months previously, in September 2003, to head the NAB’s British operations. Stewart had gained his reputation as CEO at Woolwich Building Society, which he demutualised, expanded and flogged off to Barclays in early 2003. Stewart left his own toxic legacy to the NAB (he was himself forced out in July 2008).
Stewart sold the extremely troubled Irish and Northern Ireland subsidiaries in December 2004 — a sensible move. Clydesdale and Yorkshire was to be another matter.
Stewart had brought one Lynne Peacock, a colleague at Woolwich, to Melbourne in April 2004. Peacock was named “Executive General Manager, People and Culture” to oversee a culture-change program, expected to take 18 months to two years to complete. But a priority for Peacock was the linking of pay to individual performance. Apart from its shonky conceptual underpinnings and measurement difficulties, such a push was beside the point given the NAB’s then profound cultural problems.
Cultural change was readily consigned to the too-hard basket. Rather, Stewart engaged in a massive advertising and public relations program. The latter was represented by the issuing in August 2004 of a “Statement of Corporate Principles”, entirely platitudinal (“We will be open and honest / We will tell it like it is (no spin)”) — designed to be flouted. The September decision to sponsor the 2006 Melbourne-based Commonwealth Games was part of the PR push.
NAB dysfunctionality further entrenched at Head Office and Clydesdale
Peacock returned to the UK in October 2004. Stewart had designated her as the new head of Clydesdale, with Yorkshire (decided in September and effected in December) to be subsumed into Clydesdale. Peacock’s salary was boosted 30 per cent to £525,000 for the occasion. The package involved a potential doubling of that figure if she met certain “performance hurdles”.
The NAB’s European operations had a regular turnover of CEOs. One person on the list was Fred Goodwin, later infamous as the man who drove the Royal Bank of Scotland to a gigantic loss during the GFC. Goodwin advised the NAB on the takeover of Clydesdale and of Yorkshire, and became CEO of NAB Europe for the period 1995-98. Goodwin’s Wikipedia entry notes:
‘Around this time he gained the moniker “Fred the Shred” from City financiers, reflecting a reputation for ruthlessly generating cost savings and efficiencies whilst at Clydesdale.’
As noted, Targett became CEO of NAB Europe (2002-03), apparently just to get him away from Head Office.
Peacock was appointed to the top job (after December 2004, that of Clydesdale), where she remained until mid-2011. If management turnover was a problem for operational continuity, Peacock’s longevity appears to have been notable for its ineptness. Peacock presided over the unraveling of the three disasters outlined above.
An issue arose soon after Peacock had taken over, involving the incorporation of Yorkshire into Clydesdale. Trouble at t’mill. Quoting my 2007 article:
‘In 2005 [Amy] Davies was lured to NAB Europe from Price Waterhouse Coopers to assist in post-Enron compliance procedures. Within a year she had been sacked for 'behavioral' reasons. Ms Davies fault was to have discovered a discrepancy of £128 million in ledger transfers between the two subsidiaries [Yorkshire was in the process of being subsumed within Clydesdale]. Although initially offered full support by senior management, within a month she was removed from the investigation. When she continued to discover further discrepancies incidentally, she was sacked on the spot.’
This affair was reported in the Scottish press (no longer available) but ignored in the Australian press. A minor incident perhaps, but not unrepresentative of the evolving dysfunctional culture at Clydesdale, and a foretaste of larger things to come.
In store for the NAB, including Clydesdale, was a claim by Stewart in October 2004 that the bank would “adopt a more aggressive risk profile …” in seeking to gain market share. Stewart would adopt the mantel of Cicutto. The series of calamities to 2003 and their causes were to be swept under the carpet, while new calamities were to be set in train.
Stewart’s claim was made in the context of the NAB’s annual report for 2004 (October-September). Net profits for the NAB were down almost 20 per cent from 2003 to under $3.2 billion. This decrease included a dramatic reduction of profit for Clydesdale and Yorkshire to $442 million, compared to an average net profit of $750 million over the previous four years.
Clydesdale moves south, compounding the fiasco
The use of fixed interest with swap loans for SMEs/farmers began in 2001, linked to the bank’s desire to expand its financial services, and ultimately as an “integrated” package to clients, and to expand the client base.
The expansion of infrastructure to accommodate this grand ambition apparently begins in financial year 2003. There occurs the beginnings of an aggressive move south by Clydesdale & Yorkshire — to pursue affluent communities and compete with Britain’s largest banks. The first “integrated financial services” centres, to deliver “integrated financial solutions”, are established (see the 2003 annual Report) — beginning with Liverpool, Bristol, Reading and Southampton.
Exactly when, and under whose direction, these first centres were established is not clear. Steve Targett quits as head of NAB Europe in February 2003. John Stewart is hired in August and probably formally takes up the Clydesdale CEO reins in October 2003 (the new financial year), only to leave for Head Office Melbourne in February 2004.
Stewart brought with him Lynne Peacock and Mike Williams from Woolwich via Barclays. The expansion of the Integrated Financial Services centres escalates under Stewart. With Stewart soon back in Melbourne, it appears that the responsibility for the establishment of the centres resides with Williams as Head of Clydesdale’s Business & Private Bank and, after October 2004, formally under Peacock’s authority.
The move south, accompanied by the toxic brew of hubris and incompetence, the perpetrators well remunerated, was a fiasco in itself. A Clydesdale whistleblower is reported thus (March 2015):
‘… the pressure to meet targets and make bonuses created a culture that was the most "corrosive and threatening". "There was pressure to sell at all costs that was driven from the top of the organisation," he says.’
In the process, the operations and reputation of established relationships, especially in the farming sector, were severely compromised. Peacock leaves in mid-2011 and Williams was forced out only in 2012, following a Head office review under CEO Cameron Clyne. Williams’ departure message to staff, 20 April 2012, claimed only successes (marred only by the GFC) during his tenure. Peacock was readily appointed to a number of British boards, including the Nationwide Building Society, highlighting that “market intelligence” is something of an oxymoron.
Will simmering Clydesdale boil over?
In late 2014, NAB CEO Andrew Thorburn and Board Chairman Ken Henry thought they could readily put Clydesdale to rest, with an initial arbitrary $1 billion set aside to clean up the mess.
But Clydesdale’s victims are not going away.
It looks, however, that NAB Head Office might have deftly pushed the ongoing problem onto Clydesdale shareholders. As the Clydesdale (CYBG) 2017 Annual Report highlights (pp.221-2), NAB gave to CYBG a “Conduct Indemnity Deed” to cover “contingent liabilities in respect of Relevant Conduct Matters”. But the Deed was capped at a mere £1.7 billion, to cover all of NAB’s sins through Clydesdale. All but £148 million was already used up by 30 September 2017. Presumably, that residual will also have disappeared by now, with CYBG holding the can for ongoing aggrieved customer litigation over the fixed interest TBLs. The prospect of contingent liability carryover was denied when the floatation of Clydesdale was being spruiked. Nice work Andrew Thorburn and Ken Henry.
Of note, the banking Royal Commission, formally established on 14 December 2017 by Letters Patent, includes in its Terms of Reference section (i):
‘[Our Letters Patent … require and authorize you, to inquire into the following matters:] any matter that has occurred or is occurring overseas, to the extent the matter is relevant to a matter mentioned in paragraphs (a) to (h);’
Apart from NAB intransigence, the NAB’s Clydesdale victims have confronted a British political and bureaucratic class partially supportive (Treasury Committee members and individual politicians) but with no support amongst senior ranks where it matters. In addition, the British courts appear to be universally antagonistic.
Clydesdale victims have sought legal assistance, only to find that some law firms and lawyers have “changed colour” in the process. This selling out the client is not unknown in Australia, not least for NAB victims, where victims find that their own lawyers are de facto working for the bank as well. What is it about the banking sector / legal “profession” relationship that victims don’t know about?
The errant banks are to be saved from themselves at the victims’ expense.
Perhaps Clydesdale victims will find in our banking Royal Commission a vehicle for the belated public exposure of their experience, the character of the putrid facilities that ruined their lives, and of their claims for adequate compensation.
As for the NAB, it’s chock full of contradictions. The CEO Andrew Thorburn purportedly possesses “a strong Christian faith”. Board Chairman Ken Henry was previously one of the most senior public servants in the land, purportedly committed to serving the public interest. Mike Baird, also a professed Christian, joined the NAB in April 2017 as ‘chief customer officer for corporate and institutional banking’, having spent six years as New South Wales Treasurer and Premier devoted to pillaging the State’s assets and making Sydney unlivable.
In December 2015, the NAB Executive signed up to the Banking and Finance Oath.
In April 2016, the NAB joined with the Australian Bankers’ Association to claim that the Oath was being embodied in:
‘… comprehensive new measures to protect consumer interests, increase transparency and accountability and build trust and confidence in banks.’
On its own account, the NAB claimed specifically:
‘Banking has always been about service, integrity, trust and ethics. Today’s announcements are designed to reinforce these standards and enhance our customers’ experience with us.’
There are parallel worlds being posited here. Contrast this with an Australian whistleblower’s evaluation when s/he exposed a scam in early 2015 (here and here) with the NAB’s “wealth management” division.
The whistleblower had this to say (March 2015):
“The revelations in the UK are merely an extra nail in NAB's proverbial ‘cultural coffin’ and is further evidence of wide-scale, systemic cultural and operational dysfunction extending beyond NAB Wealth," the whistleblower says. “This is what happens when a 'path to least resistance' approach is adopted to risk management in a commercially aggressive sales environment where incentives are rewarded accordingly — new products are developed and implemented without effective people, process and technology controls designed to mitigate customer loss and regulatory scrutiny.”
As the Americans say, “go figure!”
There is no sign that the NAB’s dysfunctional culture has been confronted, and a three decades-long list of victims, not least foreclosed and destitute Clydesdale borrowers, remains waiting for redress and justice.
This article is an amended version of one that first appeared on Independent Australia in two parts on 22 and 24 February 2018