The EY team needed to know what Henry thought so it could help the bank prepare a report, required by the Australian Prudential Regulation Authority , that would assess NAB’s performance on risk management and culture.Startlingly, the chairman said he was "confident" the bank was still selling products that would trigger compensation for customers in the future.
They reveal a flawed approach to risk, poor controls, technology challenges, a failure to adequately address and fix compliance issues and slow remediation. Insiders warn that when compliance alerts don’t work properly it can result in scandals and consumer detriment. "I’ve decided to take a big risk in disclosing a cache of highly sensitive NAB documents after losing patience with APRA, ASIC and the royal commission in exposing the true extent of failures in NAB’s risk management practices … a symptom of cultural decadence and operational incompetence."EY was sent a detailed list of questions but declined to comment for this story, saying it did not comment on client matters.
This was just months before his now-famous royal commission appearance in which he was asked why the board paid full bonuses to executives at a time when there had been so many scandals at NAB.Henry told his EY inquisitors that he questioned the usefulness of risk limits such as having red-flag transactions for issues like money laundering.So did he feel the bank had enough compliance grunt?
"Had they embarked on more comprehensive plans two to three years ago, they would not have spent as much today," he said. At every fourth committee meeting, he suggested, committee members could allocate one hour, without paperwork, just to "sit on the couch and think through which risks they had not considered yet".The internal documents also gave new details on NAB's troublesome internal systems.
From a customer’s perspective it meant losses weren’t detected, while from NAB’s perspective it contributed to reduced management focus and an insufficient investment in improving systems. At the time Thorburn told the media: "The main point is that we are very confident we’ve got the monitoring, the oversight, the supervision we need… we’re meeting all our obligations."
There were also problems in NAB Wealth’s risk and controls systems relating to the detection of financial advice breaches – problems that had been identified as far back as October 2014 – including forgery, fraud and misconduct among financial planners.“NAB had always cut close to the bone when it came to investing in systems and culling risk staff,” the whistleblower said.
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