Treasurer Scott Morrison expects more executives at Commonwealth Bank of Australia will go, after a “damning” report by the banking regulator.
The Australian Prudential Regulation Authority inquiry, which followed an embarrassing money laundering scandal, has uncovered a culture of complacency and a board that failed to provide adequate oversight.
“It found there was a complacent culture, dismissive of regulators, an ineffective board that lacked zeal and failed to provide oversight,” Mr Morrison said in Canberra on Tuesday.
The treasurer also pointed to “a lack of accountability and ownership of key risks by senior executives, a remuneration framework that had no bite”.
“While CBA is a sound financial institution … that rap sheet that I’ve just read out from APRA is very damning,” he said.
“The report, I think, is required reading not only for every financial institution in this country but, frankly, it should be the next item on the agenda of every single board meeting in this country regardless of whether you’re a bank or not.
“It goes to the heart of what responsibilities of board directors are.”
Asked what the CBA board should do, Mr Morrison said a number of board members and executives had already resigned.
“My understanding is there will be others who will be leaving and that’s what I expect to happen,” he said.
According to APRA, “CBA’s continued financial success dulled the senses of the institution” particularly in relation to the management of non-financial risks.
CBA has now agreed to an APRA-enforceable remedial action plan and to carry an additional $1 billion in regulatory capital on its balance sheet.
APRA chairman Wayne Byres said CBA’s governance, culture and accountability practices needed considerable improvement.
Asked what people should make of the big banks, which enjoyed the protection of taxpayers during the global financial crisis via a government guarantee, Mr Morrison said Australians should be as disappointed as he was.
But he stressed the government was taking action, citing the “permanent” bank levy included in last year’s budget.
The levy is expected to raise $16 billion by the time the government’s planned corporate tax cuts have through the economy.
Labor leader Bill Shorten said the findings were very serious, coming on the back of recent hearings of the financial services royal commission.
“It’s almost like a fire hose of bad news coming at Australians … about our banks,” he told ABC radio.
The Greens used the report to argue theirs was the only party putting forward policies to bring the sector to heel and restructure the banking sector.
“The major parties, who have both taken millions in donations from the big banks, continue to ignore these systemic issues,” the party’s treasury spokesman Peter Whish-Wilson said.