Following a damning report on losses of life savings by customers of the Commonwealth Bank of Australia (CBA)—one of the country’s big four banks—the Abbott government is working closely with the management to protect the bank. At the same time, it is trying to push through new financial advice regulations that will lead to even greater ripoffs being suffered by small investors.
The 519-page report tabled by the Senate Economics References Committee examined the operation of the Australian Securities and Investments Commission (ASIC), the government’s corporate regulator. The report revealed that more than 1,000 CBA clients, including self-funded retirees, lost their savings because the bank’s financial planning companies not only misled them into buying high-risk products but also fabricated documents, doctored clients’ files and forged signatures.
The misconduct by financial advisers at CBA subsidiaries Commonwealth Financial Planning Limited (CFPL) and Financial Wisdom (FW) mostly occurred between 2006 and 2010, but in some instances up to mid-2012.
The compensation bill to those whose lives were ruined could top $250 million, but the number of people affected is still not known due to the bank’s cover-up efforts. The Senate report stated that CBA management “deliberately played down the extent of the problems” to “contain adverse publicity and minimise compensation payments.”
After consultations with the government, the CBA chief executive Ian Narev last week undertook a public relations manoeuvre to head off calls for a public inquiry. He apologised “unreservedly” to affected clients and announced a so-called independent review of their concerns.