SYDNEY (Reuters) - Commonwealth Bank of Australia’s (CBA.AX) chief executive told a banking misconduct inquiry on Tuesday that his predecessor had told him to curb his “sense of justice” when he suggested halting sales of potentially harmful insurance products.
CBA Chairwoman Catherine Livingstone also blamed previous management for governance failings as top executives of Australia’s biggest bank testified for a second day at the powerful Royal Commission inquiry.
The bank has said it would have to refund about A$46 million ($33.5 million) to 154,000 customers after selling them unsuitable insurance when they obtained loans or credit cards, just one of a number of scandals that has engulfed the lender over the past two years.
“‘Temper your sense of justice’,” CEO Matt Comyn said his predecessor, Ian Narev, had told him in response to his advocacy for ceasing selling the products during a 2015 meeting.
“I was insufficiently persuasive,” added Comyn, the former head of retail banking who replaced Narev in April in the wake of a money-laundering scandal at the bank.
Narev could not be reached for comment.
Comyn was the first chief executive of a major bank to be grilled at the quasi-judicial inquiry which since February has exposed widespread misconduct throughout Australia’s financial sector including rampant fee-gouging, fraud, predatory sales tactics and deception.
The heads of Westpac Banking Corp (WBC.AX), Australia and New Zealand Banking Group (ANZ.AX), National Australia Bank (NAB.AX), and investment bank Macquarie Group Ltd (MQG.AX) are expected to testify over the next two weeks.
The commission has already issued a scathing interim report condemning the culture of greed that pervaded the top levels of Australia’s financial industry. Its final report due in February could recommend sweeping regulatory reforms and prosecutions.
CBA stopped selling poor-value credit-card and personal-loan insurance products in March this year, a few days before the commission began examining misconduct in the consumer credit industry.
But Comyn said there had been a number of other examples of the bank putting profit ahead of customers’ interests, including charging clients fees without providing them with services.
The bank’s record of misconduct and poor culture showed CBA had not had the right leaders in the past, he added.
“Do you feel that they have the right leaders now?” barrister assisting the commission Rowena Orr asked.
“We will see,” Comyn answered. “I hope so.”
Chairwoman Livingstone said that she developed concerns soon after joining CBA’s board in March 2016 about its poor governance and culture.
“I was quite surprised by the lack of challenge,” Livingstone, a prolific board member of Australian companies who had previously chaired the country’s largest telecommunications company, told the inquiry.
“I think the urgency ... and degree of follow-up in general terms was not what I’d been accustomed to.”
Livingstone became CBA chairwoman in January 2017, a few months before the bank was sued by the country’s intelligence agency for massive breaches of money laundering rules.
Livingstone will return to the stand on Wednesday.
($1 = 1.3710 Australian dollars)
Reporting by Paulina Duran; Editing by Stephen Coates