October 11, 2018 / 2:46 AM / 10 days ago

UPDATE 2-Australian bank CEOs say inquiry was needed to expose abuses

* Westpac’s Hartzer no longer opposes inquiry

* CBA’s Comyn says incentives may have played part in misconduct (Recasts on both bank CEOs reversing opposition to inquiry)

By Byron Kaye and Paulina Duran

SYDNEY, Oct 11 (Reuters) - The CEOs of Australia’s two biggest banks said on Thursday they were wrong to oppose an inquiry that has unearthed widespread financial services misconduct, underscoring the scope of the publicity nightmare engulfing the industry.

The mea culpas from the heads of Commonwealth Bank of Australia and Westpac Banking Corp, encapsulated the apologetic tone of a sector which was defiant until the explosive inquiry began in February.

It has since aired accounts of banks mistreating customers by charging fees without providing service, taking charges from dead people’s bank accounts and paying bonuses for selling products people did not need.

“It’s very clear with all the things that have come out ... that the Royal Commission has been a very valuable process,” Westpac CEO Brian Hartzer told a parliamentary hearing, referring to the quasi-judicial inquiry.

CBA boss Matt Comyn told the same Senate committee hearing the bank was wrong to oppose a Royal Commission.

Australian bank bosses are required to appear for regular public questioning by parliament but have not faced public interrogation by the Royal Commission’s barristers. Comyn was the first to appear before the Senate committee since the Royal Commission commenced in February.

The commission has stunned the corporate sector of the world’s No. 14 economy, which is bracing for the fallout in the form of tougher regulation, stiffer penalties, higher compliance costs and fines. The valuations of the country’s top money managers are down A$64 billion ($45 billion) this year.

Last month the judge running the inquiry slammed banks’ focus on profit over customers in an interim report.

Westpac’s Hartzer said the report was “searing (and) pointed out a lot of things that we need to do better.”

Comyn said incentives had helped create the corporate culture which permitted abuses, and that the bank had cut A$100 million a year in incentives.

Asked why it took the Royal Commission to make the bank fix its culture, Comyn said: “I don’t think there’s an acceptable explanation ... other than to say we have been too slow to get to the root cause.”

He said the bank had fired 41 staff for misconduct this year, while nine more had resigned under investigation for matters likely to result in termination. Not all were directly linked to the Royal Commission.

Shares in CBA and Westpac were down about 2.7 percent, in line with global declines. ($1 = 1.4144 Australian dollars) (Reporting by Byron Kaye and Paulina Duran; Editing by Stephen Coates)

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