SYDNEY—Initial findings from a powerful inquiry into Australia’s financial sector strongly criticized pension funds run by National Australia Bank and Commonwealth Bank for regulatory breaches including overcharging customers and failing to act in their best interest.
The findings from the Royal Commission, released late Aug. 24, said some banks acted in an “ethically unsound” manner with a disregard for regulators and the law, and also criticized two of the country’s financial watchdogs.
CBA declined to comment. NAB responded on Aug. 25 saying it disagreed with some of the inquiry’s findings and would address them in a response to the Royal Commission’s closing submissions by Aug. 31. It did not provide details on which parts of the findings it disagreed with.
“We take our obligations to uphold the law seriously. Where we get it wrong, we expect to be held accountable,” NAB said in an emailed statement.
“We are also focused on earning the trust and respect of or customers every day, and when we do not live up to their expectations we will make it right.”
The Royal Commission inquiry into financial services misconduct began earlier this year and this month shone a spotlight on the country’s A$2.6 trillion ($1.90 trillion) superannuation or pension funds, many of which are owned by the country’s largest banks.
The Royal Commission is expected to submit an initial report to the government by the end of September but the probe has already rattled financial investors and led to senior management shake-up and CEO resignations.
Over the past few weeks, the Royal Commission has revealed examples of major breaches of responsibility by institutions that hold workers’ retirement accounts including dishonorable conduct, charging dead customers fees and lax senior management oversight.
On Aug. 24, the counsel assisting the inquiry listed a series of breaches by the National Australia Bank saying senior officials demonstrated “a lack of insight into the problems” and “an unwillingness to acknowledge problems with the behavior of entities for which they were responsible.”
The problems included fees for no service, failure to be open and transparent with the regulator and failure to assess whether it should refund fees, among others.
“Assessed as a whole, it is submitted that this behavior indicates a disregard on the part of the NAB Group for members of the relevant superannuation funds, for regulators and for the law,” the 223-page report noted.
The findings also listed a string of regulatory breaches by the CBA, while AMP and IOOF were not spared either.
The report on Aug. 24 criticized regulators too.
It said the Australian Prudential Regulation Authority was reluctant to commence court proceedings against erring lenders. The statement also raised questions over the Australian Securities & Investment Commission’s (ASIC) competence as an effective conduct regulator.
ASIC has not commenced any civil penalty proceedings against banks for fees for no service, the findings noted.
“It has not yet turned its mind to the question of what profits the banks and AMP have derived from receiving money, without providing service, and having only been required to remediate customers.”
Neither APRA nor ASIC were immediately available for comment.
By Swati Pandey