Australia's biggest company, the Commonwealth Bank, has a complacent culture and ineffective board, the country's financial services regulator said Tuesday in a scathing assessment after a series of scandals. The banking giant has been embroiled in claims it broke anti-money laundering and counter-terrorism financing laws and is also facing court over alleged rigging of the benchmark interest rate, which is used to set the price of domestic financial products.
The Australian Prudential Regulation Authority (APRA) launched an inquiry into the lender last year to examine its governance, culture and accountability. Its overarching conclusion was that "CBA's continued financial success dulled the senses of the institution", particularly over the management of non-financial risks.
"These risks were neither clearly understood nor owned, the frameworks for managing them were cumbersome and incomplete, and senior leadership was slow to recognise, and address, emerging threats to CBA's reputation," its report said. While emphasising CBA had a sound financial position, Treasurer Scott Morrison said the APRA report was damning. "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," he said.
Morrison said it showed the bank had "a complacent culture, dismissive of regulators, an ineffective board that lacked zeal and failed to provide oversight, a lack of accountability and ownership of key risks by senior executives". CBA said it had given an "enforceable undertaking" to APRA to address all recommendations made in the report.
They include a more rigorous level of governance, improving accountability, and a cultural change "that moves the dial from reactive and complacent to empowered, challenging and striving for best practice".
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