Bank bosses await Hayne’s call
National Australia Bank’s Ken Henry and Commonwealth Bank’s Catherine Livingstone have emerged as the favourites of the major bank chairmen to appear as witnesses in the financial services royal commission’s final round of public hearings.
Preparations are well advanced for the congested policy round, to be rotated between Sydney in the week beginning November 19 and Melbourne the following week.
CBA and NAB have yet to receive formal notification that Ms Livingstone and Dr Henry, a former head of the federal Treasury, are required as witnesses, but interactions with the commission indicate it is highly likely.
ANZ chair David Gonski and Westpac chair Lindsay Maxsted are believed to be in the clear.
Confirmed CEO appearances include CBA’s Matt Comyn, Westpac’s Brian Hartzer, ANZ’s Shayne Elliott, National Australia Bank’s Andrew Thorburn, Macquarie Group’s Nicholas Moore and AMP’s Mike Wilkins.
Ms Livingstone is an obvious target because of CBA’s long rap sheet of misconduct, notably the $700 million penalty for multiple breaches of money-laundering laws that triggered a searing review of the bank’s culture and governance by a three-member panel appointed by the Australian Prudential Regulation Authority.
NAB, meanwhile, has been the surprise villain of the hearings so far, with Dr Henry’s previous role as the nation’s top financial services policymaker likely to be a further area of interest.
The potential appearance of the chairs of the two of the nation’s top-six listed companies sets the commission apart from similar exercises in the past, highlighting its reach into the highest levels of corporate Australia.
ASIC agreed it should be more agile in initiating and prosecuting court action.
It also sets the scene for a blockbuster final round that will determine the future shape of a sector that employs 450,000 people and is the largest contributor to the Australian economy.
The entire industry remains on tenterhooks until commissioner Kenneth Hayne hands over his final report to the Morrison government before February.
Last month, The Weekend Australian revealed that ASIC chairman James Shipton and his APRA counterpart, Wayne Byres, had been called to appear after both agencies were pilloried in Mr Hayne’s interim report for pursuing soft regulatory options.
It was also revealed that the major bank chairmen were in Mr Hayne’s sights, but most likely not all of them.
Unlike the previous six rounds of hearings, the seventh and final round will have no consumer witnesses, although the commission has named the targeted companies and government agencies.
The four major bank CEOs will appear, possibly two chairs, the CEOs of AMP and Macquarie Group, and the chairmen of ASIC and APRA.
It is understood that the big four CEOs have received their “rubrics”, which set down the commission’s areas of interest and form the basis of witness statements.
While Bendigo and Adelaide Bank is the ninth institution listed on the royal commission’s website as participating in the hearings, it is understood new managing director Marnie Baker will not be appearing.
It is likely that Bendigo will respond in writing to a number of issues, including remuneration.
“We haven’t received a formal request to appear in the round seven hearings but are ready to assist the royal commission in whatever way we can in the interest of improving outcomes for customers and communities,” a spokesman said yesterday.
Mr Hayne indicated in his interim report that he wanted to further explore issues that arose in the commission’s case studies, their underlying causes and how the entities responded.
The issues were split into four groups: access to banking services, the role of intermediaries, responsible lending, and regulation and the regulators.
As to the causes, the commissioner will look at conflicts of interest, remuneration structures, culture and governance, and regulatory responses.
Finally, he will examine the appropriate responses, including possible changes to the law or simplification, management by the entities of conduct and compliance risks, possible changes in the regulatory architecture, the place for industry codes of conduct, and structural change such as the elimination of vertical integration in the wealth industry.
The chairmen of ASIC and APRA will be probed about how their agencies respond to conduct and compliance risk, the possible detachment of some functions and whether they should be subject to external review.
The commission yesterday released the responses of both regulators to Mr Hayne’s interim report, which took them to task for their light-touch approaches.
ASIC agreed it should be more agile in initiating and prosecuting court action, and in some cases should even start with it.
“ASIC accepts that the proper starting point is for it to ask the question: why not litigate?” the watchdog said.
The prudential regulator said it had been misled by entities on their adoption of required policies, when the implementation turned out to be deficient.
Requirements to manage conflicts of interest had also not been effectively implemented.
APRA, which received $58m in extra funding this week, implied it remains under-resourced, with 200 frontline supervisors to oversee 600 entities. This led to reliance on assurances from regulated institutions that controls were effective and in place.
The commission could drill down for a board perspective from Dr Henry on NAB’s wealth issues, including the departure of exwealth boss Andrew Hagger.
Counsel assisting, Michael Hodge QC, said Mr Hagger had showed a “disrespect for the role of the regulator (ASIC) and a disregard for the gravity of the events in question” — the likely losses from wrongly imposed plan service fees. NAB contested the finding. While Mr Thorburn was communicating with Mr Hagger because of the proximity of the bank’s annual result, the evidence so far is that he had no role in Mr Hagger’s dialogue with ASIC.
Clockwise from above: CBA chair Catherine Livingstone, NAB chair Ken Henry, ANZ chief executive Shayne Elliott, and NAB chief executive Andrew Thorburn