Aussie bank’s epic ‘$10 billion’ mistake
Australia's banking regulator dropped a damaging lawsuit on the National Australia Bank last night on eve of its crucial annual general meeting.
The Australian Securities and Investments Commission announced last night it would launch legal proceedings against the major bank for fees for no service, fee disclosure statement failures and false representations.
ASIC in its lawsuit alleges the bank's own internal reviews found major deficiencies in its record keeping and risk management systems.
The commissioner claims NAB continued to charge ongoing fees for no service until at least February 2019 despite knowledge of it from at least May 2018.
ASIC alleges the bank broke the law 10,000 times with each breach worth a maximum penalty of $250,000.
Meanwhile the penalty per breach of unconscionable conduct and false representations range from $1.7 million to $2.1 million.
This means NAB could be facing a maximum fine from ASIC of about $10 billion.
NAB's chief legal counsel Sharon Cook said the bank had already acknowledged fees for no service failures and had begun paying back $37.8 million to 27,500 clients.
"We have already acknowledged failures where customers have paid fees for services they didn't receive," she said.
"Remediation began in December 2018 and is expected to be completed by June 2020."
By comparison, the Commonwealth Bank agreed to pay $700 million to the financial intelligence agency Australian Transaction Reports and Analysis Centre (AUSTRAC) over 53,700 breaches of anti-money laundering and counter-terrorism funding laws.
Meanwhile, AUSTRAC is investigating Westpac over 23 million breaches with each worth a maximum penalty of $21 million.
NAB chairman Brian Chronican told shareholders at today's AGM the bank had already paid back customers a significant amount.
"The remediation of customers is already under way, it should never have happened we except that," he said.
"ASIC's actions relate to the penalties NAB should be receiving for these actions and we don't know where that will land. While we haven't included these breaches in the financial statement now we do already have provisions for the remediation of these customers."
NAB'S CHANGE OF THE GUARDS
The AGM will also be the first chance shareholders have to talk to Ross McEwan, the new NAB chief executive officer who started less than a fortnight ago.
Mr McEwan's appointment followed a changing of the guards in February this year with the final report of the banking royal commission.
The royal commission, which was conducted last year by Commissioner Kenneth Hayne, released its final report in February.
Mr Hayne used his final report to single out NAB's former chairman Ken Henry and CEO Andrew Thorburn.
Mr Hayne said he was not confident the lessons of the past had been learned by the leaders.
"I was not persuaded that NAB is willing to accept the necessary responsibility for deciding, for itself, what is the right thing to do, and then having its staff act accordingly," he said.
Mr Henry was criticised for being "unwilling to accept any criticism of how the board had dealt with some issues".
Meanwhile, Mr Thorburn was accused of treating the fees for no service issue "as nothing more than carelessness".
It took less than a week for the final report to come out for both Mr Thorburn and Mr Henry to resign from their posts.
Mr Thorburn left immediately, apologising for the role he played while Mr Henry kept his role of chairman until November when it was announced that Mr McEwan would take on the permanent role.