As Westpack Chief Executive Brian Hartzer faced a royal commission on Wednesday, it was revealed that many of the bank's advice did not meet the expectations of the corporate watchdog on the duty to act in the best interests of clients and to maintain the right recordings.
Following a wave of scandals in financial consultations that have caused other big banks to sell a large part of their wealth management business, Mr Hartzer also admitted that the consulting industry's economy was "very difficult."
A senior attorney, assisting the Michael Hodge QC Commission, took Mr. Hartzer in an internal note from the end of October, revealing weak gaps in a recent audit of his advice. Last year, the bank raised its standards to reflect the "higher expectations" from the Australian Securities and Investment Commission (ASIC).
The note states that in September this year only 61% of the files audited by internal consultants meet the required standards. The pass rate was 60% for the counselors who worked for the Westpac-owned licensees.
"The results of recent file audits using these higher standards show results at a level that does not show a robust enough control environment to comply with ASIC expectations," the report said.
Mr. Hartzer explained that the bank has been implementing measures since 2015 to cope with the risks in its financial consultancy business, some of which are still ongoing, but business continues to face a number of challenges.
As a sign of serious problems in the councils, Mr. Hodge took Mr. Hartzer on millions of dollars, which the bank recovers in fees for advice that had never been provided.
Mr Hartzer confirmed that, since ASIC had expressed concern in this matter in 2016, the extent of the Westpack problem has flared as it has dealt with the issue in more detail.
The bank has allocated $ 117 million to cover compensation for fees charged by paid planners and may have to pay millions more for planners who have worked for consultations that have used their license, known as "dealer groups" .
Mr Hartzer has confirmed that Westpac estimates that Westpac's "authorized representatives" have received a total of $ 991 million in ongoing consultancy fees between 2008 and 2018.
However, the bank is faced with a set of problems in determining the amount of future compensation, because incomplete entries mean that it is not always clear who should receive services while some counselors have left or have not transmitted information.
Given the high cost of business consulting compensation, many of Westpac's rivals reduced their presence in the sector.
Mr Hartzer said the bank still has to give advice, but the economy that remains in this sector is "very difficult".
Mr Harzzer was also questioned about a previous car loan, which was reviewed by the committee earlier this year, in which the bank failed to verify properly whether personal staff for elderly people could afford the debt.
When asked why the loan might have been made, Mr Hartner suggested that this was because the dealer of the dealer wanted to get a commission or perhaps tried to help because it was a "very sad" story about a woman who was was "desperate" to get a car.
When Mr. Hodge asked how likely the trader was to express false data to Westpac "from the good of the dealer's heart," Mr. Hartzer replied: "I can not say that I am not a car dealer."
Mr. Hodge said this answer is "quite confused" and "ignores your position, namely, that you are dependent on car dealers to make these loans for your profit."