Two of Australia’s big four banks have been given a dressing down at the ongoing royal commission into banking and financial services, with the commission’s findings indicating that NAB and Commonwealth Bank could face potential criminal charges over their treatment of superannuation customers.
In a set of preliminary findings handed down on Friday, the commission’s lawyers said they are open to finding that NAB’s superannuation trustee NULIS had “engaged in misconduct” on 10 different accounts, largely relating to the bank’s alleged incorrect charging of fees to users.
This included allegedly charging dead customers fees for their superannuation accounts, withholding information from Australian Securities and Investments Commission (ASIC), improper fee disclosure, and issues around moving customers into MySuper accounts, which led to members continuing to pay grandfathered commissions.
The royal commission’s lawyers slammed NAB’s practices and culture, criticising some of NAB representatives who gave evidence at the commission.
“Assessed as a whole, it is submitted that this behaviour indicates a disregard on the part of the NAB Group for members of the relevant superannuation funds, for regulators and for the law,” the lawyers stated.
Commonwealth Bank also featured in the commission’s preliminary findings from its hearings into the superannuation industry, with the commission taking issue mainly with CBA-owned superannuation trustee Colonial First State allegedly breaking the law over 13,000 times when it failed to move a number of its super members into low-cost MySuper accounts by a certain deadline.
Commonwealth Bank admitted it had breached superannuation law by missing the deadline, and the royal commission’s lawyers found the bank was “right to acknowledge this contravention”, which may give rise to further contraventions.
These include a failure to exercise the “degree of care, skill and diligence as a prudent superannuation trustee”, which potentially led to member’s account balances being “adversely affected” by unnecessary fees.
Furthermore, the potential contraventions include a failure to prioritise the interests of members over the interests of advisers, in the form of ongoing commissions received by advisers that they would have otherwise not received if the super deadlines were met.
Both banks were also accused of being in breach of the Corporations Act over alleged tardy breach reporting.
Regulators also criticised
Australia’s banking regulators were also slammed by the commission, with the Australian Prudential Regulation Authority (APRA) criticised for being “reluctant to commence court proceeding and to take public enforcement action” in relation to its dealings with super trustee IOOF.
Additionally, the commission said some of ASIC’s approaches to regulation “raise questions as to whether it has struggled to date to act as an effective conduct regulator” and it even accused the regulator of facing a “collapse of regulatory authority”.
These accusations were largely due to ASIC’s reluctance to undertake proper reviews into alleged misconduct by NAB, and a reluctance to push for “industry-wide compliance” in relation to actions by ANZ and CBA.
“[This] may suggest that it would be preferable that another regulator be tasked with ensuring good consumer outcomes in superannuation by enforcing compliance,” the commission found.
The banks have one week to respond to the commission’s preliminary findings. In a statement, a spokesperson for CBA said the bank is reading the preliminary findings “closely” and will “consider it seriously”.
“We will provide a full, written response before the deadline, however until the Royal Commission has reviewed and published our response, it’s not appropriate for us to make any public comments,” they said.
Similarly, NAB said it would also respond in full by the August 31 deadline, but said there were “proposed findings that we disagree with”.
“We take our obligations to uphold the law seriously. Where we get it wrong, we expect to be held accountable. We are also focused on earning the trust and respect of or customers every day, and when we do not live up to their expectations we will make it right,” they said.
The next hearing by the royal commission will be into the insurance sector, which will commence on September 10. Additionally, an interim report for the past five rounds of hearings will be published before September 28.
Public submissions into the next set of hearings have not yet opened, and further details on the hearings will be published on the commission’s website.
The commission’s full report is due by February 1, 2019.