In a statement released today, APRA said it will establish an independent panel to conduct a prudential inquiry into CBA, with a final report to be handed down six months after the inquiry's formal commencement.
The goal of the inquiry, according to APRA, is to "identify any shortcomings in the governance, culture and accountability frameworks and practices within CBA, and make recommendations as to how they are promptly and adequately addressed".
"It would include, at a minimum, considering whether the group’s organisational structure, governance, financial objectives, remuneration and accountability frameworks are conflicting with sound risk management and compliance outcomes," said APRA.
APRA chairman Wayne Byres said the decision to initiate an inquiry was prompted by a "number of issues" that have "damaged the bank’s reputation and public standing" – without specifically mentioning AUSTRAC's civil court case against CBA related to money laundering.
"The overarching goal of the prudential inquiry is to identify any core organisational and cultural drivers at the heart of these issues and to provide the community with confidence that any shortcomings identified are promptly and adequately addressed," Mr Byres said.
"CBA is a well-capitalised and financially sound institution. However, beyond financial measures, it is also critical to the long-run health of the financial system that the Australian community has a high degree of confidence that banks and other financial institutions are well governed and prudently managed.
"The Australian community’s trust in the banking system has been damaged in recent years, and CBA in particular has been negatively impacted by a number of issues that have affected the reputation of the bank.
"Given its position in the Australian financial system, it is critical that community trust is strengthened. A key objective of the inquiry will be to provide CBA with a set of recommendations for organisation and cultural change, where that is identified as being necessary.
"The chairman and CEO of the CBA have assured me that the bank will fully co-operate with the inquiry, and APRA welcomes that co-operation."
Update: Federal Treasurer Scott Morrison backed the APRA inquiry as an example of the government's "take action now" approach to the major banks.
"Australia’s banks are well capitalised, well regulated and financially sound. However, there have been too many cases and events that have damaged their reputation and standing in the eyes of many Australians, that warrants our regulators taking action now," Mr Morrison said.
"I met with CBA chairman Catherine Livingstone earlier this month immediately after AUSTRAC initiated civil penalty proceedings in the Federal Court against the CBA for serious and systemic non-compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act. At that meeting I indicated I would be keeping my options open with respect to government and regulatory responses," he said.
"I note that the report will be made public and am pleased that CBA will meet the costs of the Inquiry and fully co-operate with APRA"
"This is an important initiative by APRA and will complement ASIC’s investigations," Mr Morrison said.
