By Pete Schroeder
Dec 18 (Reuters) - Australia's banking industry is reeling
from a series of regulatory scandals. Here is a broad summary of
the issues:
Why are major Australian banks in trouble?
Australian banks are still feeling the fallout from a year
long government-led inquiry into the sector, which wrapped up in
February. That revealed rampant wrongdoing across the industry,
including fees charged to the accounts of dead people and bribes
paid to win mortgage business.
The inquiry also found regulators had been too lenient in
their oversight of banks, with reported misconduct often met
with light penalties or left completely unpunished.
The government recommended overhauling how the nation's
banks are regulated and executives are paid, and referred two
dozen cases for possible legal action. The nation's four largest banks - Commonwealth Bank of
Australia CBA.AX , Westpac Banking Corp WBC.AX , Australia and
New Zealand Banking Group ANZ.AX and National Australia Bank
NAB.AX - have set aside over A$8 billion ($5.4 billion) to
refund customers for overcharged fees, miss-sold products and
non-compliant financial advice stemming from the probe.
In October, the Australian Competition and Consumer
Commission (ACCC) announced it was considering a probe into
competition issues in the retail banking sector, which is
dominated by those four banks. bank is accused of what?
In November, Westpac was sued by Australian regulators over
23 million breaches of anti-money laundering laws, the country's
biggest ever such scandal. Westpac accepted most of the
regulator's assertions, which included the facilitation of
payments to child exploiters. Its CEO and compliance head have
quit, while the chairman brought forward his retirement to early
2020. At CBA, bank executives have agreed to pay 41,000 current
and former employees nearly A$25 million ($16.97 million) after
a review found they had been underpaid. The bank's life insurance arm also was convicted in November
of 87 counts of breaking a law banning unsolicited sales calls.
The bank also agreed to pay A$700 million ($529.27 million)
in 2018 - Australia's biggest-ever corporate fine - to settle
charges of money laundering control lapses.
Meanwhile, ANZ plans to refund owners of 3.4 million
customer accounts after the inquiry revealed it wrongly charged
fees. And NAB has been sued by Australia's securities regulator,
which alleges the company charged financial advice customers
"fees for no service," even as the Royal Commission criticised
the practice during its probe. is next?
Westpac potentially faces a massive fine, as each
transaction carries a maximum penalty of A$21 million ($14
million). The bank's executives may also be held personally
liable as the prudential regulator uses new laws to scrutinise
personal accountability for the payments.
The Australian operations of several global investment banks
are also separately under scrutiny, as prosecutors allege cartel
activity by employees at Citigroup Inc C.N and Deutsche Bank
AG DBKGn.DE stemming from a 2015 ANZ stock sale.
Prosecutors argue the banks agreed to secretly keep unsold
shares from the A$2.5 billion offering to support the share
price, and, in doing so, formed a criminal cartel. Six current
and former banks from Citi, Deutsche and ANZ also face charges.
JPMorgan Chase & Co JPM.N , which worked on the deal with
the two other investment banks, has been cooperating with the
authorities since 2016 in exchange for immunity from
prosecution.