APRA inquiry net captures former CBA executives

Former Commonwealth Bank (CBA) executives and board members have found themselves captured by the Australian Prudential Regulation Authority’s (APRA’s) prudential inquiry into the bank with their decision-making having been placed under scrutiny.

APRA’s release of a carefully-worded progress report on the prudential inquiry has confirmed that it is looking at whether former and present executives were alive to issues within the big banking group and what action they ultimately decided to take.

Importantly, the inquiry panel has made clear that it is looking at remuneration structures and how they impacted on key decision-making.

The inquiry progress report said former executives and board members had already been questioned and that this was continuing.

“Interviews have been structured as general ‘fact finding’ interviews, as well as deep structured interviews to understand the organisational and cultural drivers of Board and management actions within CBA and whether particular factors are conflicting with sound risk management and compliance outcomes,” the update report said.

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It said the Panel had conducted a number of these interviews, and intended to meet with all Directors and key decision-makers during the course of the Inquiry with other interviews being run by the project team . Other interviews are being run by the project team, which then briefs the Panel.

The update said the inquiry Panel was directing its attention to some particular issues that had emerged from the work it had conducted to date.

It said these issues included:

· Board (including Board Audit and Risk Committees) and senior executive responsiveness to emerging risk issues and diligence in overseeing the resolution of these issues;

· the influence on CBA’s culture of the Board and senior executives;

· the complexity of policies and decision-making processes within CBA;

· the prioritisation and execution of investment in risk systems;

· capabilities and accountabilities for risk management in the organisation, particularly for operational, compliance and reputational risk;

· the stature, maturity and resourcing of the compliance function;

· the responsiveness of remuneration to risk outcomes, adverse or positive.