As he appeared before the banking royal commission, National Australia Bank boss Andrew Thorburn was more than keen to reflect on the huge changes that have swept through the banking industry over the past three decades – the growing importance of short-term profits, for instance, or the shift in focus away from the customer, and the increasing tendency to reward bankers with outsized bonuses.

So it was huge relief to discover that at least one long-standing behavioural trait has remained unchanged: the tendency of bank bosses to identify a convenient scapegoat to take the fall when there’s a major stuff-up.

Thorburn, of course, wasn’t so clueless as to duck all blame for NAB’s failings. He conceded that he had been “wrong” in his initial opposition to the Hayne royal commission, because the process had “provoked critical self-examination and driven change for customers”.

Why, senior counsel assisting, Michael Hodge, QC, inquired, did it require a royal commission to achieve this result?

Customer remediation was not a priority: NAB

“It’s a good question,” Thorburn replied. “In my personal and professional experience, most transformation opportunities come out of pain.”


As the courtroom erupted in laughter, Thorburn quickly clarified that this was “not Hayne pain”.

One of NAB’s major sources of pain arose from charging tens of thousands of clients fees for financial advice they never received, an issue that arose when clients were transferred from NAB financial planning to MLC Direct.

Thorburn blamed “ineffective process design” for what had happened, rather than any malign intent on the part of NAB employees. “I think it wasn’t the intention that this would happen.”

But was it “dishonest” to charge fees without providing any service. “It’s wrong, it’s absolutely wrong,” Thorburn replied, but he was reluctant to describe the behaviour as dishonest because there hadn’t been a deliberate decision to do the wrong thing.

All the same, the corporate regulator, took a dim view of NAB’s behaviour in the fees-for-no-service issue. In October 2017, ASIC sent NAB a letter of suspected offending, which Thorburn said he’d read at the time.

‘It wasn’t the spark of change that it should have been’

So what had been the bank’s reaction to the ASIC letter? “I think it probably wasn’t the spark of change that it should have been, in hindsight,” Thorburn conceded.

But Thorburn did ask Sharon Cook, who was appointed as NAB’s top legal counsel since April 2017, to get involved in the negotiations. This meant NAB now had two senior executives involved in sorting out the mess because Andrew Hagger, the bank’s former head of wealth, was still involved in discussions with ASIC. Indeed, Thorburn was at pains to emphasise that Hagger had the “primary lead on it”.

NAB's boss Andrew Thorburn shows how the bank plays the blame game.
NAB’s boss Andrew Thorburn shows how the bank plays the blame game.


In April 2018, Cook sent ASIC a letter that suggested that process for deciding what remediation should be adopted for clients who predated the July 2013 FOFA reforms should be different to that offered to the post-FOFA clients.

With the benefit of hindsight, should that letter have been sent to ASIC, Hodge, QC asked? “No,” Thorburn replied. Because the proposal put forward was not consistent with NAB’s values? “Yep, that’s correct,” Thorburn concurred.

Had the bank adopted an ethical stance? “I don’t think it wasn’t ethical,” Thorburn answered, adding that “Mr Hagger and others” were dealing with a “complex set of issues”.

Hodge continued to press Thorburn over the bank’s behaviour. Had the NAB been doing the right thing? “No,” came Thorburn’s response. And should senior executives have realised this. “Yeah, I do in hindsight, now I look it.”

Hodge, however, was not satisfied at the way the NAB blame game played out. He told Thorburn that anyone reading his statement or listening to his evidence might conclude that he was “to the maximum, placing responsibility for this” on Andrew Hagger, who departed the bank in September.

Was that what he was doing? “No,” Thorburn countered.

But, Hodge continued, even if Hagger had been responsible for putting forward an inappropriate system for remediating clients, at least three senior NAB executives who are still in the bank – Thorburn, Cook and David Gall (NAB’s chief risk officer) – were aware of the approach being advocated. Why didn’t they raise objections?

“At the time, I don’t think we saw it with the clarity we do now” was the best explanation Thorburn could offer.

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