CBA apologises for bank account manipulation

The paper argued that employees were depositing small amounts of money into the accounts that had been opened, in a bid to take advantage of sales targets and financial rewards.

The Fairfax Media investigation alleged that the scam was “part of a broader culture of gaming financial incentives at the bank where staff were caught faking customer referrals to boost performance targets and earn rewards”.

Speaking following the reports, the major bank confirmed that it had identified the behaviour following a review in February 2013, which confirmed that “small deposits had been made to some Youthsaver accounts”.

The bank confirmed that these deposits were “designed to make the accounts appear active and improve these individual employees’ incentive compensation”.

The employee incentive associated with these actions was, on average, less than $2 in total per year, the bank has said.

It added that “action was taken in early 2013 to immediately end a practice by some staff who had been identified making small deposits, typically of around 10 cents, to Youthsaver accounts”.

The new chief executive officer of CBA, Matt Comyn, has now released the following statement: “While this practice did not financially harm any of our customers, it was a breach of their trust. For that, I’m deeply sorry. 

“As CBA’s new chief executive, my number one priority is to expedite changes that will prevent any behaviour that undermines our customers’ trust in us — and to remove any CBA employee who knowingly does the wrong thing.”

Mr Comyn added: “When customers open an account, they put their trust in us and that’s particularly true when the account holder is a child. After we identified this practice by some staff in 2013, we immediately made changes to end it, and we are not aware of any evidence that the practice has occurred again in the past five years.”

He continued: “There is now a line in the sand and we have zero tolerance for behaviour such as this, irrespective of whether there is customer harm.”

CBA has said that a “number of steps” have been taken to prevent this practice from reoccurring, including:

• “Clear communication” with branch managers in March 2013 that the practice was “not acceptable” and “inappropriate behaviour” would result in disciplinary action, including dismissal. 
• Increasing the minimum amount needed to activate a Youthsaver account to $5.
• Increasing the monitoring of new accounts.
• “Substantially revising” the branch incentives with a focus on customer satisfaction, risk management and company values (as APRA’s recommendations in its report into the governance, culture and accountability within the CBA Group).

ASIC chair calls for “wholesale review” on conflicted remuneration

The subject of remuneration in the finance sector has been under the microscope in recent months, with several reviews and inquiries (including the ongoing Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry) reflecting on the commission and incentive structure in banking, wealth advice and mortgage broking, among other topics.

Indeed, in a recent speech delivered by the chairman of the Australian Securities and Investments Commission (ASIC), it was revealed that the financial services regulator had a hard line on conflicted remuneration.

ASIC chair James Shipton said: “My concern is that many people in finance have lost sight of the ultimate purpose of the financial system; they have forgotten that this system is about managing other people’s money.

“I worry that many financial services companies have become insular by focusing only on how they can maximise earnings.

“Accordingly, the first job of the sector is to refocus on these core purposes, instead of exploiting opportunities to make money from its customers often to the consumer’s considerable detriment. This is exemplified by the proliferation of conflicts of interest in parts of the financial sector.”

Noting that conflicts are a “perennial challenge for business”, Mr Shipton added that it was “clear” to him that a number of institutions “have not taken the management of conflicts of interest to heart”.

He continued: “[W]hat has surprised me is that:

• Many Australian financial firms have turned a blind eye to the risks that conflicts pose to customer outcomes as their businesses evolved or grew.
• They didn’t have a management system, a management culture, or codes that were attuned to identifying and resolving conflicts.
• There has been reluctance, and often resistance, to addressing conflicts, especially those embedded in remuneration — even when ASIC pointed them out.”

According to Mr Shipton, this “resistance has, at times, extended to a reluctance to make good any harms caused by conflicts”.

The ASIC chair therefore called for a “wholesale review by firms to identify, manage and, if appropriate, remove every conflict”.

“Only when this is done can the journey of rebuilding trust with our communities begin,” the chairman concluded. 

It has been a tumultuous year for CBA, with the reputation of the big four bank impacted dramatically by reports that it lost the personal bank details of almost 20 million customers; APRA’s conclusion that the bank had “inadequate oversight”, “unclear accountabilities” and “a widespread sense of complacency”; misconduct by financial advisers; mis-selling of insurance; allegations of manipulation of the Bank Bill Swap Rate (BBSW); and allegations that it repeatedly breached anti-money laundering and counter-terrorism laws.

[Related: Treasurer calls for all boards to review culture]