Australian government may launch CBA probe
June 28, 2014, 12:03 am TWN
SYDNEY--Australia said on Friday it would consider calls for a national inquiry into a major financial scandal at the country's biggest listed firm, but would not rush a decision.
Prime Minister Tony Abbott said he was considering a report by a Senate committee that urged a royal commission into the Commonwealth Bank of Australia's (CBA) financial planning arm amid allegations of forgery, fraud and cover-ups between 2006 and 2010.
Thousands of people are reported to have lost their life savings after CBA advisers placed them on risky products — including forging signatures in some cases — before the global financial crisis as they chased large bonuses.
The products collapsed, leading to the loss of millions of dollars.
The Senate inquiry found the bank then underpaid the victims through compensation, allegedly tried to avoid scrutiny from regulators and covered up its actions.
“This is not a recommendation that the committee has made lightly, but the evidence the committee has received is so shocking and the credibility of both (the corporate regulator) ASIC and the CBA is so compromised that a royal commission really is warranted,” Senate committee chairman Mark Bishop said.
He also recommended Australia's largest bank increase a compensation bill from an already agreed AU$51 million (US$37.50 million) to AU$250 million.
“Obviously some terrible things happened and it's good that the Parliamentary Committee enquiring into this has been able to expose some of the problems,” Abbott said.
“We want to get to the bottom of these things and we want to ensure that investors are as safe as they can be in a market economy.”
But Finance Minister Mathias Cormann suggested a royal commission was not needed.
He told the Australian Broadcasting Corporation the sole dissenting voice to the recommendation of a national probe by a senator from his Liberal party, which described another inquiry as too expensive for taxpayers, was a “very persuasive argument.”
The Commonwealth Bank apologized Friday, but “strongly refuted” the Senate's criticism that it played down any alleged wrongdoing.
“We deeply regret that some of our financial advisers did not provide quality advice to customers, some of whom had trusted and banked with us for decades,” it said in a statement, adding that it has since transformed its financial planning business.
The Senate inquiry also called for a probe into financial planning at other banks and for stronger protections for whistleblowers that approach the corporate watchdog, the Australian Securities and Investments Commission.
ASIC acknowledged Friday it should have acted in a “more timely” manner on the allegations of suspect conduct.
“In response already to that inquiry, we have changed the way we handle whistleblowers at ASIC and clearly even before this inquiry under my chairmanship, our transparency has improved quite significantly,” ASIC chairman Greg Medcraft said.
One of the ASIC whistleblowers, Sydney lawyer James Wheeldon, told ABC radio a royal commission was “warranted” and people “deserve to know what's going on.”