Okay, so I was wrong. Although I hate to admit it, I was not factually correct in my earlier post about the AML/CTF issues dogging the Commonwealth Bank of Australia Limited (“CBA”). In my piece on 14 August 2017, I noted the fact that a second regulator - ASIC, was following in AUSTRAC’s footsteps. Why have one when you can have two? I said.
So it came as a surprise that today, the Australian Prudential Regulation Authority (“APRA”) is throwing in its regulatory muscle having announced that it too is establishing an independent prudential enquiry into the CBA. The independent inquiry, comprising a yet to be announced panel and terms of reference, will focus on CBA’s governance, culture and accountability frameworks and practices. It is envisaged that the panel will provide its final report about six months after the the inquiry’s commencement.
It is important to note that the panel will not be tasked with dealing with matters that are currently the subject of other investigations - whether they be legal proceedings, actions by AUSTRAC and/or ASIC, or individual cases.
APRA has noted that recent issues have plagued the bank and have damaged its reputation and public standing. APRA is not concerned with CBA’s capital structure and financial resources, however, it confirmed that the Australian public is owed a high degree of confidence that its banks and leading financial institutions are well governed and prudentially managed.
It is understandable that the Federal Government is also jumping on board. And why wouldn’t it? Defending a bank today is on par with dumping nuclear waste in a koala sanctuary. No matter the economic sense, it ain’t going to happen!
Scott Morrison, the Federal Treasurer, agreed with the decision by APRA to instigate an independent review and noted that CBA’s Board of Directors had failed with meet investor and customer expectations. As well as agreeing with APRA’s decision to investigate CBA, he also left the door open for further intervention by the Government.
Further intervention? What could that possibly entail? I see a perfect storm comprising of an unpopular Government, continual bad polling, a Prime Minister often viewed as weak and indecisive and a Big Four Bank lying in the foetal position about to answer to a class action representing more than 3% of the Australia’s population.
The only matter that you can bank on (yes, pun intended) is that there will no Royal Commission into the banking sector - well, not in the current Parliamentary term. Mr Morrison confirmed that the APRA inquiry demonstrated that the regulatory bodies were serious in fulfilling their obligations and as such, a Royal Commission was not needed.
The CBA narrative reminds me of a movie trilogy - The Lord of the Rings, Back to the Future and the Godfather spring to mind. Is that it, or are there more vultures circling above? Will I have to amend my trilogy analogy to the Rocky franchise? Or even worse, the Star Wars saga?
Should you have any queries about compliance, licensing, or corporate governance, please contact Jeremy Danon, director of Ariel & Associates Pty Ltd on (02) 8223 3355 or at jeremy@ariel.associates.