Tag: CBA

CBA Complacent, Missed Risks, $1Bn Capital Add-in From APRA

The Australian Prudential Regulation Authority (APRA) today released the Final Report of the Prudential Inquiry into the Commonwealth Bank of Australia (CBA).

The report says CBA’s continued financial success dulled the institution’s senses to signals that might have otherwise alerted the Board and senior executives to a deterioration in CBA’s risk profile. APRA has applied a $1 billion add-on to CBA’s minimum capital requirement.

APRA announced the Prudential Inquiry on 28 August 2017 to examine the frameworks and practices in relation to the governance, culture and accountability within the CBA group, following a number of incidents that damaged the reputation and public standing of the bank. A Panel to conduct the inquiry – comprising Dr John Laker AO, Chairman of the Banking and Finance Oath, company director Jillian Broadbent AO and Professor Graeme Samuel AC, Professorial Fellow in the Monash Business School – was appointed on 8 September 2017 and the Inquiry’s investigative work began the following month. A Progress Report was released on 1 February 2018.

The Final Report is comprehensive and contains a large number of findings and recommendations. Its overarching conclusion is that “CBA’s continued financial success dulled the senses of the institution”, particularly in relation to the management of non-financial risks.

The Report also found a number of prominent cultural themes such as a widespread sense of complacency, a reactive stance in dealing with risks, being insular and not learning from experiences and mistakes, and an overly collegial and collaborative working environment which lessened the opportunity for constructive criticism, timely decision-making and a focus on outcomes.

The Report raises a number of matters of prudential concern. In response, CBA has acknowledged APRA’s concerns and has offered an Enforceable Undertaking (EU) under which CBA’s remedial action in response to the report will be monitored. APRA has also applied a $1 billion add-on to CBA’s minimum capital requirement.

As some of the recommendations deal with the way in which CBA interacts with customers, APRA will work closely with the Australian Securities and Investments Commission (ASIC) to ensure that the recommendations are addressed in full.

The Final Report’s findings

Over the past six months, the Panel examined the underlying reasons behind a series of incidents at CBA that have significantly damaged its reputation and public standing.

It found there was a complex interplay of organisational and cultural factors at work, but that a common theme from the Panel’s analysis and review was that CBA’s continued financial success dulled the institution’s senses to signals that might have otherwise alerted the Board and senior executives to a deterioration in CBA’s risk profile. This dulling was particularly apparent in CBA’s management of non-financial risks, i.e. its operational, compliance and conduct risks.

“These risks were neither clearly understood nor owned, the frameworks for managing them were cumbersome and incomplete, and senior leadership was slow to recognise, and address, emerging threats to CBA’s reputation. The consequences of this slowness were not grasped,” the Report stated.

The Panel identified:

  • inadequate oversight and challenge by the Board and its committees of emerging non-financial risks;
  • unclear accountabilities, starting with a lack of ownership of key risks at the Executive Committee level;
  • weaknesses in how issues, incidents and risks were identified and escalated through the institution and a lack of urgency in their subsequent management and resolution;
  • overly complex and bureaucratic decision-making processes that favoured collaboration over timely and effective outcomes and slowed the detection of risk failings;
  • an operational risk management framework that worked better on paper than in practice, supported by an immature and under-resourced compliance function; and
  • a remuneration framework that, at least until the AUSTRAC action, had little sting for senior managers and above when poor risk or customer outcomes materialised (and, until recently, provided incentives to staff that did not necessarily produce good customer outcomes).

The Final Report includes numerous recommendations for addressing these issues within CBA, focusing on five key levers:

  • more rigorous Board and Executive Committee level governance of non-financial risks;
  • exacting accountability standards reinforced by remuneration practices;
  • a substantial upgrading of the authority and capability of the operational risk management and compliance functions;
  • injection into CBA’s DNA of the “should we” question in relation to all dealings with and decisions on customers; and
  • cultural change that moves the dial from reactive and complacent to empowered, challenging and striving for best practice in risk identification and remediation.

APRA Chairman Wayne Byres said the Inquiry Panel’s findings show CBA’s governance, culture and accountability frameworks and practices are in need of considerable improvement.

“As the Panel notes, CBA has itself identified and begun taking steps to address many of these issues, but there is much to do and a risk that the same issues which have led to the need for the Inquiry undermine the bank’s efforts to comprehensively and effectively respond to the recommendations of the Panel.

“As a result, CBA has given to APRA an Enforceable Undertaking which establishes a framework by which CBA will demonstrate it is addressing the full set of recommendations made by the Panel in a timely manner. Until such times as these recommendations are addressed to APRA’s satisfaction, an add-on to CBA’s operational risk capital requirement will continue to apply.

“CBA is a well-capitalised and financially sound institution but CBA itself had acknowledged shortcomings in governance, culture and accountability ahead of this Inquiry. The comprehensive review, and set of recommendations set out by the Panel, provides CBA with a clear path towards restoring its public standing,” Mr Byres said.

Mr Byres thanked the panel members for their thorough Report. “The Panel, and those who supported them in undertaking the Inquiry, have delivered a comprehensive and high quality report that goes to the heart of the issues that led to the damage to CBA’s reputation. More importantly, the Report’s recommendations provide a roadmap for the CBA Board and executive team to deliver organisational and cultural change across the CBA group.

“The Panel notes in its Report that regaining community trust will require time, hard work and an undistracted risk and customer focus and that its recommendations should assist the CBA Board and staff in translating CBA’s undoubted financial strength and good intent into better meeting the community’s needs and expectations,” he said.

Mr Byres also said: “the findings of the Report provide important insight for all financial institutions, particularly about the need to maintain a broad focus on all aspects of risk and stakeholder interest and not allow financial success to mask or detract from other important measures of an institution’s performance and risk profile.”

Given the nature of the issues identified in the Report, all regulated financial institutions will benefit from conducting a self-assessment to gauge whether similar issues might exist in their institutions. APRA supervisors will also be using the Report to aid their supervision activities, and will expect institutions to be able to demonstrate how they have considered the issues within the Report.

For the largest financial institutions, APRA will be seeking written assessments that have been reviewed and endorsed by their Boards.

730 Does AMP, CBA At The Royal Commission

A segment broadcast 18 April 2018 discussing the issues raised in the inquiry, and shortcomings of the regulator.

More evidence of bankers behaving badly (on purpose) and regulators “asleep at the wheel”.

And remember the number of financial planners continues to increase..

Later in the evening, Matter of Fact went further into the structural issues arising.

ASIC accepts enforceable undertaking from CBA subsidiaries for Fees For No Service conduct

ASIC says it has has accepted an enforceable undertaking (EU) from Commonwealth Financial Planning Limited (CFPL) and BW Financial Advice Limited (BWFA), both wholly owned subsidiaries of the Commonwealth Bank of Australia (CBA).

ASIC found that CFPL and BWFA failed to provide, or failed to locate evidence regarding the provision of, annual reviews to approximately 31,500 ‘Ongoing Service’ customers in the period from July 2007 to June 2015 (for CFPL) and from November 2010 to June 2015 (for BWFA).

The EU requires, among other things:

  1. CFPL and BWFA to pay a community benefit payment of $3 million in total;
  2. CFPL to provide an attestation from senior management setting out the material changes that have been made to CFPL’s compliance systems and processes in response to the misconduct; and
  3. CFPL to provide further attestations from senior management, supported by an expert report, that:
    • CFPL’s compliance systems and processes are now reasonably adequate to track CFPL’s contractual obligations to its Ongoing Service clients; and
    • CFPL has taken reasonable steps to identify and remediate its Ongoing Service customers to whom CFPL did not provide annual reviews in the period from July 2015 to January 2018.

As BWFA ceased trading in October 2016, CFPL is the focus of the compliance improvements required under the EU.

ASIC Deputy Chair Peter Kell said, ‘Our report into Fees For No Service in October 2016 identified the major financial institutions’ systemic failures in this area, and called for fair compensation to be paid to customers who did not receive the advice reviews that they were promised and paid for.

‘This enforceable undertaking follows on from the earlier enforceable undertaking accepted by ASIC in relation to ANZ’s fees for no service conduct. These failures show that all too often the financial institutions prioritised revenue and fee generation over the delivery of advice and services paid for by their customers.’

In addition to the EU, CFPL and BWFA have also agreed to compensate approximately 31,500 affected customers in the period from July 2007 to June 2015 (for CFPL) and from November 2010 to June 2015 (for BWFA). The compensation program is nearing completion and as at 28 February 2018, CFPL and BWFA have paid or offered to pay approximately $88 million (plus interest) to these customers (with the total compensation estimated at $88.6 million (plus interest)).

Background

The EU follows an ASIC investigation into CFPL and BWFA in relation to their fees for no service conduct concerning various Ongoing Service packages which were offered to CFPL and BWFA financial planning customers for an annual fee. A key component of those packages from about 2004 (for CFPL) and from 2010 (for BWFA) was the provision of an annual review of the customer’s financial plan.

As a result of the investigation, ASIC was concerned that:

  1. CFPL and BWFA either did not provide, or have not identified evidence regarding the provision of, annual reviews to approximately 31,500 Ongoing Service customers who had paid for those reviews;
  2. CFPL and BWFA did not have adequate systems and processes in place for tracking their Ongoing Service customers and ensuring that annual reviews were provided to them;
  3. senior management were aware from at least mid-2012 that a relatively small number of CFPL Ongoing Service customers who were not assigned to an active adviser may not have received an annual review, and that there was a potential risk of a broader ‘fees for no service’ issue in relation to other Ongoing Service customers, but CFPL did not notify ASIC of the issue until July 2014; and
  4. CFPL and BWFA failed to comply with section 912A(1)(a) of the Corporations Act which provides that a financial services licensee must do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly, and a condition of their respective Australian financial services licence.

Both CFPL and BWFA have acknowledged in the EU that ASIC’s concerns were reasonably held.

View the enforceable undertaking here.

The EU has been accepted by ASIC as part of ASIC’s Wealth Management Project to address systemic failures by financial institutions and advisers, over a number of years, to provide ongoing advice services to customers who paid fees to receive those services (commonly referred to by ASIC as Fees for No Service conduct). A report on ASIC’s work in this area was released in October 2016 (Report 499), and updated in May 2017 (17-145MR) and December 2017 (17-438MR).

CBA sought to halve broker flows in 2016

From The Adviser.

Confidential internal documents from the Commonwealth Bank show that the bank sought to reduce the proportion of broker flows from around 45 per cent to “between 20 per cent and 30 per cent” in 2016.

According to an internal Reputational Impact Brief that was raised internally in October 2016, the Commonwealth Bank of Australia (CBA) was actively seeking to reduce the number of accredited mortgage brokers who were either inactive or providing very little business.

The document, which has been published by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, outlines that although CBA had approximately 13,000 accredited brokers at the time, only 1,700 wrote the “overwhelming majority” of its loans.

According to the bank, the lower performing mortgage brokers had both lower conversion rates and higher arrears.

It therefore sought to remove approximately 3,198 mortgage brokers from its accreditation (but only ended up revoking the accreditation of 710 brokers on the basis of inactivity).

The brief reveals that this project was part of a “broader piece of work” that sought to effectively halve the number of brokers writing business to the big four bank.

While outlining that the mortgage broking channel represented 45 per cent of its home loan flows in June 2016, the bank said that it was “seeking to reframe the broker strategy with the aim [of] re-balancing flows from the channel to be between 20 per cent and 30 per cent”.

By March 2017, another Reputational Impact Brief outlined that the bank had approximately 12,000 accredited brokers — one thousand less than just six months before.

This second brief revealed that the decision to reduce broker flows was being driven by “pressure from equity analyst and shareholders to re-balance home loan flows in favour of [its] Proprietary Lenders, where [the bank] make[s] a higher margin”.

Around the same time, the bank reiterated this strategy when The Adviser asked CEO Ian Narev whether the bank was moving away from the broker channel.

This was again referenced in the bank’s most recent half-year results (which also showed that broker numbers still account for 40 per cent of new home loan originations), where it stated: “Our strategic focus on improving the home loan experience for customers continued to drive increased lending through the retail bank’s proprietary channels.”

During the hearings for the royal commission, CBA’s executive general manager for home buying, Dan Huggins, clarified: “I think there is a difference between the sales and the proportion. We certainly have a objective to increase the proportion of loans that are coming through the proprietary channels, but I still want to sustain a strong broking channel and, therefore, the sort of dollar sales… I’m comfortable with where they are now but I would like to move the proportions.

“So if I could hold the current level of sales and my broking channel and then grow… the proprietary channel, that would be – you know, that would be part of the objective.”

The bank did concede, however, that it would have been better if CBA had not disaccredited brokers purely based on volume, but instead required inactive brokers to undergo more training in order to ensure the quality of their work.

Indeed, at the end of 2017, the bank announced that it would be bringing in new benchmarks for mortgage brokers “designed to lift standards and ensure the bank is working with high-quality brokers who are meeting customers’ home lending needs”.

The accreditation crackdown meant that brokers would need to fulfil more requirements, including having at least two years’ experience and hold “at least” a Diploma of Finance and Mortgage Broking Management. The bank has also since amended the way it segments its accredited brokers, bringing in a new, two-tier system: elite broker and essential broker.

Narev’s “confidential” letter to Stephen Sedgwick

As well as reducing broker numbers, the royal commission has revealed that the bank’s CEO was supportive of changes to broker commission.

The royal commission has now released the full contents of a confidential letter written by outgoing CEO Ian Narev to Stephen Sedgwick AO, as the latter was undertaking his review into retail banking remuneration.

As covered in The Adviser’s sister publication, Mortgage Business, the CBA CEO told Mr Sedgwick that he believed broker commissions were conflicted and suggested extending FOFA to include the mortgage industry.

“As the Reviewer identifies, the use of upfront and trailing commissions linked to volume can potentially lead to poor customer outcomes,” Mr Narev wrote.

He added: “A move to a flat-fee payment would enable brokers to be agnostic towards loan size and leverage. However, consideration is needed on the payment amount, on how to link the fixed payment to an underlying security rather than a product (i.e. to avoid unintended incentives to split loans into multiple fixed/variable products), and on appropriate ‘clawback’ periods to dis-incentivise the churning of loans to maximise broker income.

“A move to flat-fee could also consider the removal of ‘trail commissions’ which can encourage brokers to suggest slower paydown strategies (e.g. interest-only) that maximise broker trail commission income.”

Mr Narev added that any changes to volume-based commissions would also “need to be made uniformly across the industry and across both proprietary and broker channels to eliminate bias and avoid significant market disruption”.

Mr Narev concluded: “We agree with the Reviewer’s observations that while brokers provide a service that many potential mortgagees value, the use of loan size linked with upfront and trailing commissions for third parties can potentially lead to poor customer outcomes.

“Mortgages also sit outside the financial advice framework, even though buying a home and taking out a mortgage is one of the most important financial decisions an Australian consumer will make. We would support elevated controls and measures on incentives related to mortgages that are consistent with their importance and the nature of the guidance that is provided. For example, the de-linking of incentives from the value of the loan across the industry, and the potential extension of regulations such as Future of Financial Advice (FOFA) to mortgages in retail banking.”

Trail commissions may lead to “poor customer outcomes,” – CBA

A senior manager of the Commonwealth Bank (CBA) has admitted that upfront and trailing commissions for mortgage brokers can lead to poor customer outcomes, as reported in the Australian Broker.

During his 15 March testimony before the Royal Commission, executive general manager of home buying Daniel Huggins said the commission structure is linked to the size of the loan. The longer loan takes to pay off, the larger the trailing commission will be. “[T]hat can lead to a conflict – well, there is a conflict between – between the customer, you know, and – and the broker,” he added.

Huggins confirmed to Senior Counsel Assisting Rowena Orr that brokers can maximise their income by getting the largest possible loan approved to extend over the longest period of time for the customer to repay.

The bank knew about this as early as February 2017, according to a confidential letter by outgoing CBA CEO Ian Narev to Stephen Sedgwick, who was the independent reviewer for the Retail Banking Remuneration Review back then. Orr presented the confidential letter during the hearing.

“We agree with the reviewer’s observations that while brokers provide a service that many potential mortgagees value, the use of loan size linked with upfront and trailing commissions for third parties can potentially lead to poor customer outcomes,” said Narev in the letter.

“We would support elevated controls and measures on incentives relates to mortgages that are consistent with their importance and the nature of the guidance that is provided,” Narev added. These initiatives include delinking of incentives from the value of the loan across the industry, and the potential extension of regulations such as future and financial advice to mortgages in retail banking.

Another CBA submission attached to Narev’s letter said that broker loans are reliably associated with higher leverage compared to those applied through proprietary channels. “[E]ven for customers with an identical estimate of ex ante risk, loans through the broker channel have higher leverage… [and] loans written through the broker channel have a higher incidents of interest only repayments,” it added.

Huggins agreed with Orr that CBA’s submission lends some support to the case for discontinuing the practice of volume-based commissions for third parties. But he said there are a range of considerations that the bank would have to make.

“There is a first mover problem, in that the person who moved first would likely lose a lot of volume. The second problem is you create a conflict if one person, or half of the people move, and the other half don’t,” Huggins said.

According to Huggins, CBA has not stopped paying volume based commissions to brokers. He also confirmed the lender has not taken any steps towards ceasing its practice.

System Alert – Does Not Comply With Responsible Lending!

The Royal Commission looking at Financial Services Misconduct heard today that the Commonwealth Bank’s automated system for approving overdrafts failed and so for four years from 2011 it gave some customers a line of credit they shouldn’t have received.

As a result, the volume of overdrafts rose significantly from 228,000 in 2012 (up 80% from the previous year) to 550,000 in 2014. The bank said its automated system “spat out” wrong approvals and was “doomed to fail” because of bad design.  We discuss this in our latest video blog.

In fact, questions were raised by consumer advocacy groups before the bank released there was an issue. The implementation of serviceability assessments was not made correctly. As a result of changes made to the system, the bank failed its responsible lending obligations.

It was also slow to interact with the regulator on this issue.  Once again, cultural and behavioural issues were in the spotlight.

The object lesson here is that automated credit decision systems can lead you up the garden path.  This is important given the current rush to digital channels and more automation.

CBA’s Mea Culpa

CBA’s new CEO Matt Comyn has written to staff as the the blow touch is applied by the inquiry.

This week the Royal Commission into Misconduct in Banking, Insurance and Superannuation commenced hearings in Melbourne.

From the outset, we said that we were absolutely determined to be cooperative and open with the Commission. Unfortunately, as we heard on Tuesday, our first submissions did not meet the Commission’s expectations. This was never our intention and we will resubmit our information as soon as possible and ensure we have fully met the requests of the Commission. We will work to make sure this doesn’t happen again.

There will be cases highlighted next week where customers have been treated unfairly by us. In many cases, our actions have had a significant impact on the financial and emotional wellbeing of our customers. This is unacceptable.

Where we have made mistakes we must and will take responsibility for them, we will make things right for our customers, and not repeat the same mistakes. We will exceed our regulatory and compliance obligations, and enhance the financial wellbeing of every single customer we serve.

Together, we will make our bank better, and one we can all continue to be proud of.”

‘Excessive’ bank CEO pay under scrutiny

From Investor Daily.

The disparity between bank CEO pay and average weekly earnings is contributing to the uncompetitive nature of Australia’s economy, argues progressive think tank The Australia Institute.

The GFC+10: Executive Pay in Australia report released yesterday by the Australia Institute has scrutinised the pay packages of executives at Australia’s biggest companies 10 years on from the global financial crisis.

Homing in on banks, which had “been a particular focus of attention” in recent times, the report found NAB and Commonwealth Bank of Australia bosses respectively earned 108 and 93 times the average weekly earnings in 2017.

“Pay for the NAB CEO peaked in 2004 but even if we ignore that spike the data still show that CEO pay was increasing rapidly during the bulk of the 2000s, as people were expressing the most concern.”

For the chief executive of CBA at the time, the spike in pay was widest in the lead-up to the global financial crisis.

In fact, seven- or eight-figure remuneration packages were “likely to have played an important role in the global financial crisis” wherein chief executives risked long-term performance for short-term gains, the report said.

Such a significant gap in the earnings of average workers compared with top executives also reflected “to a large extent the uncompetitive nature of the modern Australian economy”.

“It has to be stressed that the issue of massive CEO pay is one associated with industry concentration and the dominance of big business in the Australian economy,” it said.

“According to tax office data 390,774 companies reported a positive income and declared taxable income of $281 billion, giving the ‘average’ company an income of $719,201 in 2015.

“An economy dominated by ‘average’ companies could never pay CEOs anything like the amounts going to the CEOs of the top Australian oligopolies and monopolies,” said the report.

While “growth in CEO pay was quite dramatic in the lead up to around 2007 or 2008” and had moderated since then, the report concluded remuneration for these top executives “remains excessive”.

Aussie Home Loans Relied On The Banks To Trap Mortgage Fraud

From Business Insider.

CBA owned mortgage broker Aussie Home Loans does not have the capability to detect fraud committed by its brokers and instead waits until the banks detect scams and alert them as it does not have the resources.

The admissions were made by Aussie Home Loans general manager of people and culture Lynda Harris in a second day of questioning at the banking royal commission from counsel assisting Rowena Orr, QC.

It was revealed the company had recently bolstered the risk and compliance function at the broker to a total of nine employees.

Ms Harris was being questioned about the process behind the termination of an Aussie Home Loans broker Emma Khalil. Ms Khalil submitted multiple loan applications that were based on fake supporting documents including many from the same employer and with the same details.

“We don’t have that, we are reliant on the lenders to provide that expertise because ultimately they are the organisation that is approving the loans,” Lynda Harris said.

The fraud was not picked up until the client applied for a credit card with Westpac using different income details.

After the extent of the fraud committed by Ms Khalil was revealed, multiple internal emails between Aussie management revealed the broker was waiting for confirmation from Westpac before acting.

“If Westpac find that there was fraudulent activity on her part and revoke her accreditation, then that will be in breach of her contract and ultimately result in her termination from Aussie,” one such email read.

Ms Orr asked why Aussie was waiting to hear back from Westpac before terminating the employment of Ms Khalil despite identifying a number of suspect loans supported by similar or identical fake letters of employment.

“So Westpac – and in fact all large banks, have credit specialists and fraud teams that have the expertise to be able to determine fraud. We don’t have that, we are reliant on the lenders to provide that expertise because ultimately they are the organisation that is approving the loans,” Ms Harris said.

“What I want to put to you, Ms Harris, is that it’s not good enough, it’s not good enough that Aussie Home Loans outsources to a third party investigations of a fraudulent conduct made against one of its own employees. What do you say to that?” Ms Orr asked.

Ms Harris replied by saying that Ms Harris was not an employee of Aussie Home Loans and was in fact an independent contractor. She also said that company was not able to justify the expense.

Following an incredulous look from Ms Orr, Commissioner Ken Hayne sought clarification of the point

“It is open to me to conclude from your evidence from the time of the Khalil events and earlier, Aussie was of the view it was the role of the lender to investigate and determine whether there was fraud associated with one or more transactions?”

“Is it open to conclude from what you have told me that it remains Aussie’s view that it is for the lender and not Aussie to investigate and determine whether there was fraud associated with one or more transactions?”

Ms Harris explained the mortgage broker continued to invest in its systems and processes and hoped to develop a fulsome and rigorous process for the detection of anomalies in the loans submitted by its brokers.

She said the mortgage broker was developing a dashboard that would give it better visibility over its network however it was still in pilot phase.

Commission denies CBA’s request not to publish evidence

From Australian Broker.

The royal banking commission has rejected CBA’s request not to disclose parts of evidence regarding the bank’s CreditCard Plus product.

The commission only agreed to keep confidential the name and policy number of the CBA consumer who made a complaint about the product.

In a note released last Friday, Commissioner Kenneth Hayne said CBA applied for a non-publication direction under s 6D(3) section of the Royal Commissions Act regarding parts of a draft statement to be given by a CBA employee about CreditCard Plus.

The evidence refers to CBA’s communications with ASIC regarding CreditCard Plus, an add-on insurance policy sold with credit cards, personal loans, home loans, and car loans. CBA said in its non-publication application that those communications should be treated as confidential.

ASIC announced in August 2017 that CBA would refund over 65,000 customers about $10m after selling them the consumer credit insurance product. The regulator said the product was unsuitable for those customers.

Details of the remediation program are among those CBA asked not to be published.

“General assertions are made that certain kinds of communication, such as, for example, communications between CBA and regulators, are confidential. Why the particular communications should be treated in this way is not explained,” said Hayne.

He added that arguments framed in such a way are “unhelpful and unpersuasive”.

“Absent ASIC joining in an application for a non-publication direction, I do not accept that a non-publication direction should be made in respect of any of those parts of the draft statement.”

Hayne said it was also necessary to bear in mind that CBA acknowledged in its first submission to the commission that the conduct concerned in the evidence fell short of community standards and expectations.

“CBA identified no damage to itself or any other person that would follow from publication of the material,” he said in closing.

In deciding to detail and publish its reasons for the decision, the commission seeks to provide “guidance” to others involved in its inquiry.

“The application made by CBA in respect of this witness statement does warrant a more elaborate statement of reasons and warrant publication of those reasons for the guidance of others who may seek a direction under s 6D(3),” said Hayne.

The royal commission is holding its first round of hearings from 13 to 23 March 2018 focusing on consumer lending.