NAB chief executive Andrew Thorburn was questioned at length about why the bank has taken three years to resolve how it would pay customers for illegally charging them fees without providing services.
The banking royal commission heard that NAB's top lawyer Sharon Cook, who was in the courtroom on Monday, proposed on April 13 this year that one group of customers be required to opt-in to the process compensation
Asked about this latest negotiation with the Australian Securities and Investments Commission, Mr Thorburn told by counsel Michael Hodge assisting that the strategy was the decision of former NAB executive wealth executive Andrew Hagger.
"Somebody looking at your statement and listening to the evidence that you have given today could think that you are … passing responsibility for this to Mr Hagger, the senior executive who has been redundant and left the bank. Is that what you Are you doing? " Mr. Hodge asked.
"No," Mr Thorburn replied.
The inquiry heard that on September 7, Ms Cook donated Mr Thorburn explaining that she did not take primary accountability for the fees-for-no-service issue "until after we received a cranky letter from ASIC" on May 19. That email was tender as evidence to the commission.
However, earlier evidence showed Ms Cook was asked to take over negotiations with ASIC from October 2017 when the regulator ripped into the bank with a document entitled Outline of suspected offending by NAB Group detailing systemic failures at the bank going back 15 years.
Mr Hodge then asked Mr Thorburn if he considered there were other executives who had responsibility for the issue to which I agreed to name himself, Ms Cook and chief risk officer David Gall. ASIC is now suing the bank over fees for no service matter.
Mr Thorburn admitted that the refund process would hit the bottom line but denied claims his executives behaved unethically when trying to minimize the bill. He said that in Hindsight the bank took the wrong approach but it was understandable in the heat of the moment.
Asked by Mr Hodge if he thought the actions of their executives were unethical, Mr Thorburn said: "Well it depends what you mean by unethical … I think it ended up being too technical and too legal. But the way I think of ethics , I do not think this was unethical. "
Mr Thorburn was describing a problem that would require the bank to revisit files of 85,000 clients – many of which were difficult to access, incomplete or non-existent.
Commissioner Hayne challenged Mr Thorburn's description of the problem as complex saying "big was more accurate."
"The other fundamental issue with it was that there was a revenue issue, was not there?" Mr. Hodge asked.
"Yes," Mr Thorburn replied.
A summary of the bank's engagement with the regulator dated December 2016 showed the bank was considering its position – including "income at risk and payable compensation" – while noting rival bank CBA had agreed to repay customers based on whether the service was delivered or not.
The bank has repaid or offered a repayment of $ 40 million to customers out of an estimated $ 110 million. Mr Thorburn admitted that it may have to repay $ 600 million to clients of financial advisers who were not employees but operated under NAB's license because their records were even less reliable than the banks.
NAB is working with Westpac and the Financial Services Council on a solution to the problem of licensed advisors and the lack of records. Westpac collected close to $ 1 billion over 10 years through similar arrangements.
When customers no longer had an assigned consultant, the fees for ongoing advice would be funnelled back to the bank using the identification code for NAB's head office. Mr Thorburn repeatedly rejected the characterization from Mr Hodge that keeping the fees was a dishonest act.
"Well, let me put that proposition in other words. The other words are that this money fell into the pocket of NAB accidentally. Is not that the proposition?" Commissioner Hayne asked.
"Well, I can not disagree with that," Mr Thorburn said.