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The major bank has expressed formal support for 72 of the banking royal commission’s recommendations with exception to proposed changes to the broker remuneration model.
NAB has released a report outlining the actions it will be taking in its implementation of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry’s recommendations.
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The big four bank has noted its support for 72 of the recommendations outlined by commissioner Kenneth Hayne in his final report.
With regards to proposals concerning the broking industry, NAB stated that it would support the proposed introduction of a best interests duty to be applied to mortgage brokers and the implementation of governance frameworks that are directed at “more readily identifying and addressing poor behaviour and poor customer outcomes” in the industry.
However, the bank has not accepted commissioner Hayne’s call for a “borrower-pays” remuneration model, instead noting that it would work with government, regulators, and industry stakeholders to consider reform.
“NAB will work with the Treasury-led working group to ensure that the broking industry remains viable, customers have choice and get the best possible outcomes,” NAB noted.
NAB follows the Commonwealth Bank of Australia (CBA) in issuing a formal response to the commission’s recommendations.
Like NAB, CBA stopped short of moving to adopt commissioner Hayne’s call for a ban on commission-based broker remuneration, despite CBA CEO Matt Comyn’s expression of support for the model when giving evidence before the commission.
CBA’s formal response to commissioner Hayne’s borrower-pays recommendation read: “We will work constructively with the broking industry as changes to remuneration are designed and implemented.”
Both NAB and CBA’s reluctance to adopt the borrower-pays remuneration model is in line with both the Coalition government and Labor Opposition’s policy approach, neither of which call for a borrower-pays model.
The federal government recently announced that it would support the “status quo”, despite initially calling for a ban on trail commissions.
The Labor Opposition, however, proposed a ban on trailing commissions and the introduction of a fixed upfront commission capped at 1.1 per cent.
NAB contests changes to SME definition
The major bank has also contested the commission’s proposal to amend the definition of small business in the Code of Banking Practice to any business or group employing fewer than 100 full-time equivalent employees, where the loan applied for is less than $5 million.
NAB has said that it would revise its definition, but only to reflect “aggregate borrowings” of less than $5 million.
“NAB supports the intent to expand the definition of small business and will expand our definition from aggregate borrowings of less than $3 million to aggregate borrowings of less than $5 million,” the bank stated.
However, NAB’s compromise comes despite the Australian Banking Association’s (ABA) reluctance to adopt the change.
The ABA stated that it “has not yet reached a view” and issued a warning over the potential impacts of such a change, claiming that it has “serious concerns” about the “material impact” it may have on access to credit for small business borrowers.
Despite the ABA’s concerns, the Australian Small Business and Family Enterprise Ombudsman Kate Carnell stressed the importance of broadening the definition of a small business, claiming that current arrangements are “not workable”.
Ms Carnell noted that the ombudsman’s office is in discussion with the ABA and has developed a list of amendments to the code, which she said would offer a “better framework for a balanced relationship between banks and their small business customers”.
Chairman comits to rebuilding trust
Following the release of NAB's response to the royal commission's recommendations, chair and interim CEO Phillip Chronican acknolwedged the bank's past failings and highlighted its commitment to rebuilding community trust.
NAB was singled out by Commissioner Hayne in his final report, with the scrutiny culminating in the resignations of former NAB chair Ken Henry and former CEO Andrew Thorburn.
“The royal commission’s recommendations will help lead to a better, more customer-focused industry as organisations change in response. The Commission has also rightly challenged NAB to close the gap between where we are today and where we need to be,” Mr Chronican said.
“We have to focus on earning back trust and this includes the actions we take in response to the final report and other issues we have faced at NAB.
“It includes how we compensate customers when we get it wrong; how we pay our people; how we hold ourselves accountable for running the bank and; how we build a culture that puts customers first every time.”
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