Commonwealth Bank executives felt they were not delivering proper service for customers because they were unwilling or unable to stand against the prevailing bank culture, the financial services royal commission has heard.
On Monday, the first witness in the seventh and final round of commission hearings, CBA chief Matt Comyn, admitted the bank’s private banking head, Marianne Perkovic, had said she was unhappy with her treatment of clients.
Ms Perkovic, who gave evidence to the inquiry earlier in the year, said she felt bad about “not speaking up loud enough to stand up to behaviours that I knew were not right”.
The bank had relied too much on legal and financial advisers and had not paid close enough attention to customers, she said.
Another CBA employee, Larissa Shafir had admitted that cautionary voices often went unheeded within the bank.
The “voice of challenge was not equal to the voice of compliance and finance, and change was not always wanted or well received”, she said.
Ms Shafir “felt aggrieved that the board and the executive committee did not adequately challenge each other and hold each other accountable”.
On Monday, Mr Comyn admitted to counsel assisting, Rowena Orr, QC, that CBA’s compliance resources had previously been inadequate. Ms Orr observed that the issue was actually not about hiring more compliance staff but about listening to the staff it already had.
Mr Comyn said Commonwealth Bank had a tough reputation, but its internal culture had been too focused on agreeability. There was “too much sense of relationship at all costs” and “too much fragility on the part of individuals to hear criticism”, he said.
The bank had reduced its reliance on bonuses on short-term incentives, because they could encourage bad staff behaviour. But Mr Comyn said they were still used in areas such as home-loan selling because – he believed – they delivered better performance.
Mr Comyn recounted the experience of a banker who had told him that when remuneration had moved to 98 per cent base pay and virtually no bonus, she had “done 30 per cent less work” but got the same money.
On Monday, the royal commission also compared mortgage broker sales with bank-originated mortgage products. It heard that lifting commissions to brokers led to a 5.9 per cent increase in deal amounts, while cutting them brought a fall of 5.1 per cent.
Mr Comyn said brokers provided about 25 per cent of the CBA’s loans – and up to 75 per cent for some of its subsidiaries. Research showed that loans originating from brokers tended to larger, were repaid more slowly and were more likely to fall into arrears.
In correspondence with the bank’s former CEO, Ian Narev, Mr Comyn had admitted “customers lack the financial literacy to understand their needs and the products to best meet them”.
“We need to create an environment where our front line is proactive,” he said. “We believe that variable compensation is an effective way to motivate people to provide discretionary effort.”
Mr Comyn told the inquiry the bank was moving in this direction.