A senior bank executive grilled for days at the banking royal commission over a shonky loans program led a successful push by the banking industry to delay bringing in solutions recommended by the Hayne inquiry.
- Anthony Waldron oversaw NAB’s “introducer program” and gave evidence at the royal commission
- He went on to lead an industry push to delay the implementation of key recommendations
- Advocates say protections for customers are even more important as COVID-19 hits the economy
NAB’s Anthony Waldron was the executive who ultimately oversaw the bank’s “introducer program”, which gave juicy bonuses for those who helped procure a total of $24 billion in new home loans.
The commissions were so lucrative that some bank staff and outsiders were tempted into using cash bribes and falsified documents to rort the program. The scam led to sackings, jail time and the bank facing a potential $500 million fine.
There is no suggestion of any untoward behaviour by Mr Waldron. Evidence tendered to the commission showed the complete opposite: documents detail “AW” lambasting the slow remediation of customers and pushing for a faster clean-up.
However, documents released under Freedom of Information (FOI) laws reveal that, as chair of an industry body, Mr Waldron was instrumental in achieving a COVID-driven delay to the implementation of key recommendations from the banking royal commission.
“This is not a request made lightly,” Mr Waldron wrote to Treasurer Josh Frydenberg on April 1.
“And is only done so after rigorously assessing likely industry preparedness … given the reallocation of resources and operational constraints related to the COVID-19 response.”
Failings, crimes exposed at inquiry
The year-long Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was resisted by industry and the Government, before increasing political pressure forced it into being.
Despite running through topics as dense as mortgages, superannuation and insurance in just two weeks of hearings each, it uncovered criminal behaviour and outrageous scandals that had ripped billions of dollars from customers, and ultimately forced out the chief executives and chairs of NAB and AMP.
In early 2019, the 76 recommendations from commissioner Kenneth Hayne were accepted by the Government and mostly drafted into law, with the exception of a plan to change how mortgage brokers are paid. Some were not set to be turned into law until the end of 2020.
But those reforms to the banking industry — to fix some of the astonishing problems exposed — were delayed late on a Friday night in May.
At the time, Treasurer Josh Frydenberg said the financial sector needed space to recover from the coronavirus crisis, delaying for at least six months legislation required to implement many of Mr Hayne’s recommendations.
Documents obtained using the FOI process show the extent of lobbying from powerful peak bodies in finance and banking to delay the new protections for consumers.
The Combined Industry Forum is a kind of super group body — comprising the Australian Banking Association (ABA), Mortgage and Finance Association of Australia, Finance Brokers Association of Australia, Customer Owned Banking Association, the Australia Finance Industry Association, and individual banks and institutions.
As chair, Mr Waldron pushed the case that brokers and lenders had moved “significant resources” to answer customer queries and hardship requests. He also requested a delay in the requirement for mortgage brokers to act in the best interests of their clients, because the industry could not hold conferences to educate them.
“Professional development days and training sessions cannot take place due to the ban on mass gatherings, and technology can replace only a portion of this training,” he wrote, a month before the delay was announced.
The ABA made its arguments to senior public servants James Kelly (division head, Financial Services Reform Taskforce) and Diane Brown (Division Head, Financial System Division). In emails over March and April, senior ABA executives suggested new — delayed — dates for the laws.
The banking lobby’s associate director for policy emailed through a document with its suggestions for delays. “We would be happy to meet with you to discuss the table in further detail,” they wrote in mid-March.
“Just wanted to touch base to see if there was an update,” they emailed Treasury principal advisor Mohita Zaheed on April 2.
“Seeking clarity from the Government on royal commission implementation dates as previously submitted,” the acting executive director of corporate affairs emailed Ms Zaheed on April 16. “Could we set up a time to discuss further … ideally this week?”
There were two rounds of legislation due to be introduced this year — the first in July, and the second in December.
When Mr Frydenberg announced the delay in May, he said it balanced the desire to implement the Royal Commission’s recommendations “with the need to ensure our financial institutions are in a position to devote their resources to responding to the significant challenges posed by the coronavirus.”
The measures would have dealt with the hawking of superannuation and insurance products, introduced new rules about how annual fees are charged by financial advisers, put a cap on commissions paid to vehicle dealers when they added insurance policies, and introduced a compensation scheme of last resort and a new disciplinary system for financial advisers.
At the time, Labor Party leader Anthony Albanese and Shadow Treasurer Jim Chalmers said the Government had failed by not implementing the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in full before the COVID-19 crisis.
“After receiving the banking royal commission’s final report, Prime Minister Morrison and Treasurer Frydenberg took six months to release an implementation timetable,” they said in a statement.
“One year after the report was on their desks, the Government had only completed six out of the 76 recommendations made by commissioner Hayne.”
Cash bribes, jail time
NAB’s Anthony Waldron was grilled for the first two days of the commission about the bank’s failings in its ‘introducer’ scheme, something he was responsible for as executive general manager for broker partnerships.
The scheme paid money to people to “spot and refer” customers to NAB for home loans. From 2013 to 2016 the program generated 46,000 loans worth $24 billion.
The introducers were meant to be third parties, such as accountants and real estate agents, with financial links to future customers.
But fat commission payments lured people from all walks of life. Just four introducers, including a gym owner and a tailor, referred $139 million worth of loans to NAB, and many more were deeply involved in getting loans approved so the commission would be paid.
The generous payments induced dodgy operators — including a jailed NAB staff member — to falsify documents and pay cash bribes to get loans approved.
Last year NAB banker Andrew Matthews was jailed for eight months for defrauding NAB of $640,000 through the program, spending much of it on a Ferrari F430.
An award-winning banker at NAB’s Seaford branch, he approved 129 loans, falsely claiming a friend introduced them, and therefore received a 0.04 per cent commission on the loan value.
After the scams were exposed at the royal commission, a score of bankers were sacked and, in August last year, ASIC launched civil proceedings relating to 297 loan applications over breaches of the National Credit Act. The maximum potential fine is $535 million, but no-one expects it to get near that.
Experts slam delays
Governance experts have criticised the delayed implementation of the new laws, arguing they are even more important as customers feel the COVID economic squeeze.
“The longer it takes to get these reforms, the longer it takes to get good banking service,” said law and governance expert Helen Bird.
“I know that the banks — and through [representative body] the ABA — indicated a great desire to improve things, but it’s nothing like the legislation backing up their actions to really force this.”
The course director of the Masters of Corporate Governance at Swinburne University’s law school, Ms Bird said her greatest worry was the growing time since the revelations of the royal commission and fixing the problems it exposed. November marks two years since the end of public hearings.
Dr Elise Bant of UWA Law School was scathing of mortgage brokers’ argument that they cannot yet put the best interests of their clients before their own.
“It is very surprising that they require further time for training as to the requirements of the ‘best interests’ duty, given their existing obligations in equity as a form of financial adviser already places them under strict obligations,” the professor of Private Law and Commercial Regulation wrote.
“How much time do they need to train up to do what they should have been doing all along?”
No fee, no win
The ABC received the documents under the Freedom of Information process, intended to give the public access to information.
The Office of the Information Commission goes further, promoting “that the information government holds is a national resource and is managed for public purposes, and that public access to it should be prompt and at the lowest reasonable cost.”
However, Treasury demanded $409 to compensate for the hours of work involved in assessing the request, even before deciding whether it would release the documents. Despite written pleas noting recent budget cuts and forced redundancies at the ABC, the request to waive the fee was denied.
“While I acknowledge cuts to the ABC, as reported in the media, I am not satisfied that paying the charge to process the request would cause hardship to you or your employer,” Treasury principal advisor Mohita Zaheed wrote.
Freedom of Information applications are generally meant to be processed within 30 days. The documents were released late on a Friday evening, 120 days after the initial request was made.