The Commonwealth Bank of Australia (CBA) has commenced internal reviews of its product due diligence arrangements and third party relationships following its involvement with failed advice firm Storm Financial (Storm).
In a submission to the Parliamentary Joint Committee on Corporations and Financial Services inquiry into financial products and services in Australia, CBA said the reviews would go beyond the bank’s regulatory requirements.
“We are currently reviewing and improving the initial and ongoing due diligence arrangements we apply when agreeing for our products to be advised on or promoted by third party, licensed financial planners. This will include going beyond our regulatory obligations and copying our customers on important communications,” the submission said.
The bank intends to also review and improve its supervisory requirements, with an emphasis on third party involvement.
“The fact that a relatively small financial planner group, in terms of adviser numbers, could have a disproportionately large and in some cases devastating impact on some of our customers is deeply regretted,” the submission said.
“That one of our relatively small offices could write a disproportionately large amount of home loan business without attracting further scrutiny is a disappointing operational concern.”
CBA claimed Storm’s business model and pressuring of staff, including CBA staff, played a large part in the firm’s collapse.
A number of CBA staff with inside knowledge of the banking group’s operating processes, policies and procedures were recruited by Storm, with these individuals using pre-existing relationships with staff in CBA’s Townsville area office to encourage loan approvals, the submission said.
“The message was that if they (our staff) did not process the loan applications in a manner and timeframe expected by Storm, the business would move to one of our competitors, of whom there were many,” it said.
“We acknowledge, with the benefit of hindsight, that we should have focused more on providing service directly to the customer and not to Storm. Our subsequent review concluded that this was aberrant behaviour in this particular regional office.”
The bank also identified misuse by some staff of its property valuation assessment system, known as VAS, which the bank said has now amended certain functions.
