!!!FIRST USE AFR ONLY!!! CBA CEO Ian Narev speaking to the AFR today. Photo by Peter Braig. 6 August 2017 Treasurer Scott Morrison at a press conference in Sydney, Wednesday, July 5, 2017. (AAP Image/Mick Tsikas) NO ARCHIVING

SYDNEY, NEW SOUTH WALES – NOVEMBER 17: Catherine Livingstone ,outgoing chair of the BCA, speaks at the boards annual dinner on November 17, 2016 in Sydney, . (Photo by Brook Mitchell/Fairfax Media)

Merilyn Swan and Jeff Morris outside the Commonwealth Bank in Chatswood. Jeff is a whistleblower formerly with CBA. Merilyn was a CBA customer that was ripped off by a CBA financial planner. Tuesday 28th May 2013. Photograph by James Brickwood. SMH/AGE BUSINESS 130528

The prudential watchdog’s decision to join other regulators in the Commonwealth Bank “culture attack” has been a long time coming.

To be blunt, it should have happened years ago.

The n Prudential Regulatory Authority (APRA) is embarking on an independent and public inquiry into its culture, governance and accountability.

APRA boss Wayne Byres says the aim “is to identify any core organisational and cultural drivers at the heart of these issues and to provide the community with confidence that any shortcomings identified are promptly and adequately addressed”.

Unfortunately, the inquiry smacks of desperation by the Turnbull government which has boxed itself into a corner by rejecting a royal commission into the banks.

Before the inquiry has even started, Treasurer Scott Morrison was holding a press conference saying it was “preferable” to a royal commission.

Preferable to whom? The banks? The government?

Over the past few years CBA and the other banks have been at the centre of a number of scandals which have resulted only in light touch regulation and nobody senior losing their jobs. The boards and senior executives were like Teflon.

Regulators including APRA and ASIC made a series of tough speeches about culture and banks, but that’s all they ever were, words.

Strong transparent regulatory intervention and heads on sticks were needed well before the Austrac money laundering scandal broke. They were certainly needed before this latest inquiry.

Instead we got tepid regulatory responses which meant each scandal compounded the previous one. CEO’s apologised, only for another scandal to break, further eroding trust. ns stopped listening to the apologies and the rhetoric.

It was a perfect storm for the Opposition to back a royal commission in 2016, shortly after the CBA life insurance scandal broke.

APRA is now taking up the cudgels with an inquiry that will hopefully restore community trust. It is a tall order in the current climate.

At a press conference in response to the APRA inquiry, CBA boss Ian Narev was asked why APRA had picked CBA to launch a public inquiry into its governance and culture.

Narev’s response was that over the past few years the bank has been in the news for the wrong reasons. He believed APRA wanted to look at whether there were any root causes, and do it transparently.

He is right. It should be transparent. Then again all the other investigations into CBA and the other banks should also have been transparent. Instead, they were conducted behind the scenes with the public given sanitised reports and kept in the dark about how they were put together.

In the case of the CBA, its cultural problems date back to the financial planning scandal, which, thanks to CBA whistleblower Jeff Morris, exposed forgery and fraud, a cover up by management and a compliance division that was known as the “business prevention unit”. None of the executives or board members lost their job, despite the havoc that was wreaked on many lives.

A Senate inquiry chaired by former senator Mark Bishop concluded in 2014 that CBA needed a royal commission to get to the bottom of the problem. It didn’t believe ASIC could be trusted to do the job. This should have sent warning bells that something was amiss.

The next big scandal came in March 2016 when CBA’s former chief medical officer blew the whistle on misconduct in its life insurance division. Like the financial planning scandal, nobody lost their jobs and nobody was convinced CBA had learnt its lesson.

ASIC spent a year investigating the scandal. The brief report was sadly deficient. The investigation was opaque and added to the growing disquiet. The fact that it didn’t bother interviewing customers or victims of the bank added to the scepticism.

What was horrifying was the bank was found to be financially incentivising some managers who had knocked back the claims of sick and dying people. It speaks volumes about the culture executives and the board presided over.

The handling of the scandals sent a strong message that banks can do what they like with little comeback.

They can sell dud life insurance policies that contain outdated medical definitions and when they get caught, backdate them a few years and move on. They can diddle people by charging fees for services not rendered and the only punishment is to refund the money.

It is why the Austrac scandal has had so much impact. It was a bigger scandal than the others as it involved allegations of money laundering and terrorism finance and problems dating back to 2012.

Unlike some of the other scandals it didn’t involve a whistleblower who had gone to the media. It was Austrac making explosive allegations. It was another division of the bank that was flouting compliance. It was the straw that broke the camel’s back.

That’s not to say the other banks are squeaky clean. They have also breached trust with other scandals including the bank bill swap rate scandal, NAB’s financial planning scandal, and charging customers for services not rendered.

APRA said in a statement it was critical that community trust is strengthened.

The success or otherwise of this inquiry will boil down to the terms of reference, the panel members chosen, any perceived political interference and how far CBA is invited inside the tent or is kept at arms length.

It will also depend on how many people lose their jobs. In the case of NAB and its investigation by APRA, it was a bloodbath.

If the report, to be released six months after the appointment of the panel, fails to rebuild trust across the sector, the clock will tick even louder for a royal commission.

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