The head of Australia’s largest bank has been the first to take the Hayne royal commission hotseat the final round of public hearings, where he admitted to his organisation’s “significant failings,” including wrongly selling credit-card insurance to more than 64,000 unemployed customers.
The bosses of the big four banks have been summoned to appear before the commission to be grilled over the run of scandals and the commission’s interim report. The hearing, which commenced this Monday and will run for a fortnight, focuses on the causes of misconduct and potential solutions.
Matt Comyn, the chief executive of Commonwealth Bank, acknowledged that CBA should not have sold its Creditcard Plus insurance to 64,000 unemployed customers because they were ineligible, and that the wrongful sale of insurance products was largely due to the bank’s failure to act on a 2011 report by ASIC, The Guardian Australia reported.
The inquiry heard that the problem was discovered in 2015, when an internal audit found the bank had failed to introduce ASIC-recommended changes to its sales scripts.
Comyn said he warned CBA chief executive Ian Narev of his concerns about the insurance products a number of times in 2015 and 2016, but nothing was done about that profitable part of the retail-banking business that was bringing the company $150 million a year, The Guardian and AFR reported.
Comyn also admitted that the bank baulked at scrapping the volume-based commissions to mortgage brokers, despite knowing the practice encourages brokers to write larger-than-necessary loans.
Last year, CBA came close to changing the incentive for brokers but backed out the last minute because it didn’t believe its competitors would follow its lead, meaning the bank may have potentially lost brokers to competitors – and millions of dollars in profits from new mortgages along with it, Comyn said.
The CBA chief noted that the bank’s culture would be one of the hardest aspects of the business to change because it is difficult to measure, The Guardian reported.