NAB chief executive Andrew Thorburn was questioned about why the bank has taken three years to resolve how it would repay customers for illegally charging them fees without providing services.
The banking royal commission heard that NAB's top lawyer Sharon Cook, who was in the courtroom on Monday, proposed on April 13 this year that one group of clients would be required to opt-in to the compensation process
Asked about this most recent negotiation with the Australian Securities and Investments Commission, Mr Thorburn told the counsel assisting Michael Hodge that the strategy was the decision of former NAB wealth executive Andrew Hagger.
"Somebody looking at your statement and listening to the evidence you have given today might think that you are … passing responsibility for this to Mr Hagger, the senior executive who has been redundant and left the bank. is he doing? " Mr. Hodge asked.
"Well," Mr Thorburn replied.
The inquiry heard that on September 7, Ms. Cook emailed Mr Thorburn explaining that she did not take primary responsibility for the fee-for-no-service issue "until we received a cranky letter from ASIC" on May 19. That email was tended as evidence to the commission.
However, earlier evidence showed that Cook had been asked to take over the negotiations with ASIC from October 2017 when the regulator ripped into the bank with a document titled Outline of suspected offending by NAB Group detailing systemic failures at the bank going back 15 years.
Mr Hodge then asked Mr Thorburn if he considered there were other executives who were responsible for the issue to which he had agreed to naming himself, Ms Cook and chief risk officer David Gall. ASIC is now suing the bank over the fees for no service matter.
Mr Thorburn admitted that the refund process would hit the bottom line but rejected claims his executives behaved unethically when trying to minimize the bill. He said that in hindsight the bank took the wrong approach but was understandable in the heat of the moment.
Asked by Mr Hodge if he thought the actions of their executives were unethical, Mr Thorburn said: "Well, that's what you mean by unethical … I think it's too technical and too legal. , I do not think this was unethical ".
Mr Thorburn was describing a problem that would require the bank to review files of 85,000 customers – many of which were difficult to access, incomplete or non-existent.
Commissioner Hayne challenged Mr Thorburn's description of the problem as a complex saying big was more accurate.
"The other fundamental issue was that there was a revenue issue, was not there?" Mr. Hodge asked.
"Yes," Mr Thorburn replied.
A summary of the bank's engagement with the regulator dated December 2016 showed that the bank was considering its position – including "revenue at risk and compensation payable" – while noting the rival bank CBA had agreed to repay customers based on whether the service was delivered or not.
The bank has repaid or offered a repayment of $ 40 million to customers out of an estimated $ 110 million. Mr Thorburn admitted that he might have to repay up to $ 600 million to customers of financial advisors who were not employees but operated under NAB's licenses because their records were even less reliable than banks.
NAB is working with Westpac and the Financial Services Council on a solution to the problem of licensed advisers and lack of records. Westpac collected nearly $ 1 billion over 10 years through similar arrangements.
When customers no longer have an assigned adviser, the fees for ongoing advice will be paid back to the bank using the identifying code for NAB's head office. Mr Thorburn has repeatedly rejected the characterization by Mr Hodge that keeping the fees was a dishonest act.
"Well, let me put that proposition in other words." The other words are that this money has dropped into NAB's pocket accidentally. Commissioner Hayne asked.
"Well, I can not disagree with that," said Mr. Thorburn.