PROPERTY

Royal Commission lashes out on NAB

Bishwas Bhattarai, Senior Lending Manager
M. Comm. (Banking & Finance) UNSW, Dip. Fin. Plan.

15th March 2018

“Where brokers substitute a customer’s expenses with HEM, they are bypassing one of NAB’s primary servicing controls, do you agree that is he effect of this conduct? “ Counsel Rowena Orr asked.

“Yes” replied NAB head of consumer lending, Angus Gilfillan.

 

Wrath of Royal Commission is likely to overshadow banking and finance sector for some time now. And, is guaranteed to create more media headlines once more hearing is underway throughout this year. Australian prime minister Malcolm Turnbull announced last November, the Royal commission been established to investigate misconduct, sub-standard community acceptance practise including culture and governing issues within the Australian Banking sector.

This week (National Australia Bank) NAB copped their fair share with their schedule hearing, first among major banks no surprise their ghost home loan referral program came to hunt back from 2016 grave. For the best part of last two and half years NAB has tried to clean the so called “dirty laundry” referral business where it is expected over 200 suspect “liar loans” with over $50 million are still floating around. During 2015-16 about 20 NAB staffs were sacked and numerous introducers were put on notice where most loans were drawn with fake identification and/ or documentation. The grim warning came as Commissioners were convinced as the NAB executives were aware of the incident and let it run few months prior to reporting to Australian Securities and Investments Commissions bank in December 2015.

During this week’s Royal Commissions hearing, these allegations resurfaced and will likely be more scrutinised in coming days. Back in November 2016 NAB commenced to remediate approximately 2300 customer that are affected by liar loans where the information were not correct and/ or falsified. According to one of the case presented a client who did not disclose five dependents ultimately resulting the customer to financial hardship. Counsel Rowena Qrr QC was not overly impressed on the questions answered by NAB head of broker partnership Anthony Waldron.

NAB’s third party brokers loans also copped scrutiny, and is alleged as most of the loans originated from broker has deliberately under-stated the living expenses in order to service the loan, which otherwise may not have been serviced. NAB is the first of the major Bank currently been questioned by Royal Commission and others are scheduled on later dates.

“Where brokers substitute a customer’s expenses with HEM, they are bypassing one of NAB’s primary servicing controls, do you agree that is he effect of this conduct? “ Counsel Rowena Orr asked. “Yes” replied NAB head of consumer lending, Angus Gilfillan.

This shows banks genuine un-wiliness to protect customer’s best interest and to accept the bad practise presented to Bank. The incentive program within the bank and broker has always been flagged as primary reason for such bad practise to flourish, and will be closely watched.

It has not been that long since Royal commission lashed out on nation’s largest bank Commonwealth Bank of Australia (CBA), for handing out spreadsheet and report that lack the comprehensive information. Like its counterpart NAB, CBA has growing issue with adopted broker business Aussie Home Loans which already had seen several brokers subject to regulatory actions, for contributing to liar loans. CBA has already accepted 17 conduct of misconduct within its subsidiary broker business. CBA submission has been deemed unsatisfactory and has been one of only banks forced to resubmit report. CBA has its share of bad practices with allegation relation to financial planning, and money laundry during the last few years. Westpac has advised Bank will be providing additional material which previously it did not take into account of some data. ANZ has flagged itself win 58 stances of misconduct or practice that are below expectation. 40 financial institutions including all majors were asked to hand 50-page submission outlining the misconduct or best practises covering the last 10 years span.

Till 09th March, 1894 submissions have been received by Royal Commission, with 67% been within banking industry mostly related to personal finances. Royal Commission is led by Honourable Kenneth Madison Hayne AC QC, with expected to submit an interim report by 30 September 2018 and final report by 01 February 2019.  Royal commissions have its unprecedented power from Royal Commission act 1902, and could impose up to two years imprisonment for not complying.

Photo Source: Royal Commission on Australian Banking