The first day of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry heard startling evidence that National Australia Bank (NAB) managers took envelopes full of cash as part of an alleged bribery racket in which bankers sold loans based on fake documents to “smash” sales targets.
The use of outside home loan “introducers” and the bank’s dodgy lending practices led to signatures of customers being forged and false documents being lodged to get home loans. NAB has admitted that 20 managers have resigned or been sacked over the scandal.
One senior NAB official said the “introducers” scheme had been “extremely profitable” for the bank, which had issued nearly 46,000 home loans worth more than $24 billion through this corrupt system between 2013 and 2016. The NAB is estimated to have paid up to $100 billion to introducers over that period.
This first round of hearings is dealing with banks’ misconduct and failure to live up to community standards on home loans, personal loans, credit cards and credit insurance. Commissioner Kenneth Hayne has already expressed exasperation at the lack of cooperation by the Big Four banks, and their lack of transparency concerning the mounting scandals that have plagued the sector.
The commissioner had earlier rejected an attempt by the Commonwealth Bank of Australia (CBA) to suppress details of evidence regarding oversold insurance, saying its submission was “unhelpful and unpersuasive”.
Hayne also rebuked the banks over the deficiencies in their preliminary submissions, aimed at admitting and listing their misdeeds and dubious practices over the past 10 years. In particular, the CBA was criticised for swamping the inquiry with “meaningless” spreadsheets.
The Financial Rights Legal Centre’s Karen Cox told the commission the offer of credit limit increases by financial institutions is a key part of a serious problem.
Cox also said she was worried about the role of mortgage brokers in the financial system: “A large proportion of problematic home loans we see has been initiated through brokers and we see people much more likely to be in trouble on broker initiated loans,” she said.
The Finance Sector Union said on March 13: "This is a once-in-a-generation chance to shine a light on the toxic systemic practices throughout our industry. We will tell the Royal Commission about the effects of institutional culture, conflicted pay and bonus systems, and performance management processes, on workers and customers alike.
“Above all, we are here to be the voice and champion of all finance workers. We will ensure the Royal Commission hears more than the ‘bad apples’ message from the banks. We will tell the Royal Commission what it's really like for finance workers day by day.”