CBA forced to put aside $1 billion extra by bank regulator APRA
Updated
The Australian Prudential Regulation Authority has slammed the Commonwealth Bank over events leading to allegations that it broke anti-money laundering and counter terrorism financing laws on almost 54,000 occasions.
In its final report into governance, accountability and culture at the CBA, APRA said the bank's "continued financial success dulled the senses of the institution".
The report found the CBA had a "widespread sense of complacency, a reactive stance in dealing with risks, being insular and not learning from experience and mistakes."
APRA also pointed to an "overly-collegial and collaborative working environment" which lessened the opportunity for constructive criticism.
While emphasising the soundness of CBA's financial position, Treasurer Scott Morrison said the APRA report was a damning rap sheet and called it "required reading" for every financial institution in Australia.
"It found there was a complacent culture, dismissive of regulators, an ineffective board that lacked zeal and failed to provide oversight, a lack of accountability and ownership of key risks by senior executives, a remuneration framework that had no bite and they were reactive, slow and had under-resourced systems and processes internally," he told reporters.
"A lack of accountability is a common theme. An inability to identify who is accountable when things have gone wrong. Inadequate remuneration outcomes for adverse risk and compliance outcomes."
Mr Morrison warned board directors generally that they need to "step up", saying it is a very serious job, not a retirement job.
"This should be a wake-up call for every board member in the country, particularly those who are the custodians of the savings shareholdings of millions of Australians, they expected better those shareholders of board members and they have been let down, terribly," Mr Morrison said.
Top 500 CBA execs forced to read report
Responding to APRA's report, the CBA acknowledged the regulator's concerns and offered an enforceable undertaking in response to the report.
The undertaking is to address all of the report's recommendations, such as tighter board and executive governance on non-financial risks, tougher accountability backed by pay outcomes and an upgrading of risk management and compliance.
In what will be criticised as a slap on the wrist rather than a penalty, APRA will also add $1 billion to the CBA's minimum capital requirement until the changes required by the undertaking are completed to the regulator's satisfaction.
CBA's chief executive Matt Comyn has said that the bank's top 500 executives will be given a printed copy of the report and required to read and respond to it within the next week.
The APRA inquiry was launched on August 28 after the Commonwealth Bank was accused by the financial intelligence agency of breaching anti money laundering and counter terrorism financing laws on 53,700 occasions.
The APRA panel was chaired by former APRA chairman John Laker, who examined CBA's culture with former ACCC chairman Graeme Samuel and company director Jillian Broadbent.
The Commonwealth Bank is briefing investors later this morning.
Follow Peter Ryan on Twitter @peter_f_ryan.
Topics: banking, regulation, federal-government, government-and-politics, australia
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