CBA chief vexed with lagging advice remediation

On Friday, CBA chief executive Matt Comyn told the House of Representatives standing committee on economics the bank’s remediation process for misconduct in its aligned advice businesses was the “most challenging”, because of how far back it reached and the lack of documentation.

“So far, our progress has been slower than we would have liked,” Mr Comyn said.

“And we’re very focused, given the scale of the dollars that are there that we want to refund those customers as quickly as possible.”

CBA has made total provisions for remediation matters related to its aligned advice businesses of $834 million, having boosted its stash by $300 million at the end of July. The total covers $689 million in customer refunds (including $280 million in interest) and $136 million in program costs.

In contrast, Mr Comyn noted the bank completed its remediation for matters related to salaried advisers a number of years ago, which cost it around $150 million.

“The difficulty which is an explanation rather than an excuse, is that aligned advisers who never worked with the Commonwealth Bank, they were typically running their own businesses but they operated under our financial services licence, which means we are liable,” Mr Comyn said.

“In some cases we are going back to up to 10 years ago, trying to track down the individual advisers. In one example, we are actually going back to approximately four years before the Commonwealth Bank even owned or had anything to do with a particular financial services licence.

“We’re trying to track down the advisers, understand what their record keeping is. Because there’s both a combination of customers who may have paid for a service that they didn’t receive [and] there’s also customers who may have received the service but the record keeping, which is a critical requirement, isn’t adequate or robust enough, which means they need to be refunded in full with compound interest applied to that.”

Liberal MP Jason Falinski also pointed to how ASIC had criticised the banks for splurging on expensive external advisors to assist their remediation processes, instead of paying customers.

CBA added 343 full-time staff to its internal remediation team in the 2020 financial year.

“We have hundreds of people in our internal team, but we have also supplemented that with external advisors, mainly because we’re trying to find a faster way to actually return money to our customers and in some cases, and remediation projects [are] an example, we just don’t have the resources internally,” Mr Comyn said.

“Given everything else we’ve got on, we’re just trying to find ways to accelerate those programs.”

The chief also noted CBA is refunding money that had been paid to advisers and not to the bank.

“So, unfortunately, it is complex. We would acknowledge it is taking too long,” Mr Comyn said.

“We share the regulator’s frustration and it’s incumbent upon us to distribute the funds back to customers as quickly as we possibly can.”

The bank had also considered cutting down the process and paying customers more than they were otherwise entitled to, if it had proceeded a thorough remediation.

“In our minds, [it is] fine and appropriate,” Mr Comyn said.

“Of course you can’t do that across the entire customer base because these are fees and income that were received by the Commonwealth Bank. And you can imagine shareholders, quite rightly as the owner of any company would, would feel strongly about refunding things that weren’t actually entitled.

“So there is a trade-off between certainly the customers where, let’s say they’re owed in this case, a small amount of money, but then the cost of trying to investigate to see whether that money is owed or not could actually be larger than the money that’s owed.”