National Australia Bank (NAB) CEO Andrew Thorburn gave testimony on November 26th as part of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

The bank has already paid more than $100 million to compensate victims of superannuation mismanagement. But Commissioner Haynes is just getting started, and top bank executives are coming under fire.

For quite a while, NAB clients were charged a “plan service fee” for general advice. But the customers didn’t have a financial advisor linked to the account, and received no advice.

Even death couldn’t protect deceased customers from these fees which were still charged to their accounts.

Throughout this time, Andrew Thorburn was NAB’s CEO. He now faces questions about how this could happen on his watch and why nothing was done sooner.

It’s ironic that the man who lambasted bitcoin as “unregulated” now finds himself answering for rampant lack of regulation within his own bank.

Think you’re safe if you’re not an NAB customer? Think twice – Commonwealth Bank of Australia (CBA) fared no better when facing the commission on the matter of charging the dead unconscionable fees.

In one case reported by The Guardian, CBA continued charging a deceased client’s account for more than a decade after their death.

Corporate Responsibility, What’s That?

“You know, [compensating victims] wasn’t an agenda item on a busy board schedule,” NAB’s CEO told Queen’s counsel Michael Hodge.

Mr. Thorburn was explaining to the lawyer why he, along with other bank executives, didn’t respond to client concerns immediately:

“At the time, I just don’t think we saw it with the clarity we do now.”

But charging unsuspecting customers and the deceased? Most people would have the “clarity” to condemn such behaviour without a royal commissioner’s prompting.

Approximately 60% of recently deceased NAB superannuation clients were still being charged for receiving non-existent advice, along with thousands of still-breathing customers.

“We were dealing with 85,000 customers. […] It was one of the most complex things we’ve had to face,” Mr. Thorburn explained to Michael Hodge QC.

This did not impress Commissioner Kenneth Hayne, who called the remuneration of 85,000 customers a “big, rather than complex” task.

While Hayne wasn’t impressed, it seems the NAB board certainly was – the 10-person board showered Thorburn with million dollar bonuses.

Apparently the board felt that a suitable punishment for all this negative publicity caused by recent events was a slap on the wrist – to drop his salary to an estimated at $7.8 million.

Playing the Blame Game

A particularly frustrating part of Thorburn’s testimony was his eagerness to shift blame for executive decisions he made. This didn’t go unnoticed by Queen’s Counsel Michael Hodge.

“It seems […] you are, to the maximum extent possible, passing responsibility for this to Mr. Hagger, the senior executive who has been made redundant and left the bank. Is that what you are doing?”

The lawyer also reminds the NAB CEO that any actions taken by Mr. Hagger had to be approved by three bank executives, including himself.

NAB customers trusted at Mr. Thorburn and his associates would look after their financial wellbeing. But in many cases, superannuation clients were being taken advantage of – even from the grave.

“We Weren’t Wanting to be Unethical”

Queen’s counsel Michael Hodge also placed a spotlight on NAB’s reluctance to comply with laws governing victim compensation.

He presented the commissioner with a NAB board memorandum summarising FOFA regulatory engagement from December, 2016.

The memorandum shows that an agreement was reached to distinguish between pre-FOFA and post-FOFA customers. This decision was proposed by the general manager of regulatory strategy and affairs, and supported by the chief risk officer.

The document also discusses the potential loss of revenue and the high cost of compensation to affected customers.

“Was that the real problem?” Mr. Hodges asked.

“[Agreeing] to an acceptable methodology with ASIC was just going to cost the business more than it wanted to pay?”

Mr. Thorburn disagrees. According to him, it wasn’t “a sort of conscious or openly discussed matter.”

But in the unethical and profit-dictated culture described by Mr. Thorburn earlier, that seems unlikely.

A Pattern of Zero Accountability

The case of Graeme Cowper, as outlined in a NAB internal report, exemplifies the toxic culture at play here.

A breach report to ASIC was filed by NAB in 2010 after an internal investigation found evidence of file reconstruction and inappropriate advice by Mr. Cowper.

Instead of taking any serious disciplinary action against its employee, Mr. Cowper quietly left the bank with a substantial payout and a job at AMP.

This is likely because NAB executives were complicit in his activities. For instance, Mr. Cowper had a base salary of $80,000 but made up to $850,000 a year on commissions — profits shared with the bank, according to the Australian Financial Review.

It seems that when bank executives can unethically make money off their Australian customers, the financial burden of their paying customers is a small price to pay.

Nowhere to Hide

Over the coming weeks, the royal commission will continue bringing inconvenient truths to NAB’s attention.

Big bank executives skirt around financial regulations and put profit above customer satisfaction with near impunity. So it’s no surprise that while faith in financial systems declines, cryptocurrency and bitcoin interest grows.

Early bitcoin users realised this before many others did, and they have been busy constructing a banking alternative that relies on verification not trust. There are flaws in this system as well (volatility for instance) but accountability is easier to monitor on the blockchain.

And if this royal commission has proved one thing, it’s that there is a serious lack of accountability in our current banking system.

In the next week, the royal banking commission will be airing NAB’s dirty laundry. And we’ll be here to report on it. To keep track of the updates, subscribe to our newsletter here.