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National Australia Bank’s (NAB’s) principal board risk committee knew of misconduct in than bank’s “introducer program” months before formally informing authorities.
During the second day of the Royal Commission’s inquiry into illicit practices in the banking sector, Senior Counsel Assisting Rowena Orr said she received a document from the bank’s counsel detailing minutes of a 4 November 2015 meeting. NAB’s group chief risk officer reported the potential misconduct at that time. A statutory breach report was filed before the Australian Securities and Investments Commission on February 2016.
At least 1,360 NAB customers have been potentially affected by misconduct related to the program, NAB executive general manager of broker partnerships Anthony Waldron told the Royal Commission on that same day. The bank has contacted about 71% of them, he added.
The introducer program pays third party professionals for referring their customers to the bank for loans. Unlike brokers, they are not required to be licensed or regulated by the National Credit Act.
Waldron confirmed that some introducers were from industries unrelated to financial services. At the end of October 2015, for example, four introducers – one of them a gym owner – provided $139.78m of loans drawn down to NAB. Waldron also confirmed that $3.60m from those introducers were delinquent.
NAB fired 20 bankers in New South Wales and Victoria last year and disciplined 32 others, after the bank’s review identified around 2,300 home loans since 2013 that may have been submitted with incomplete or incorrect information.
There were about 8,000 “introducers” from 2013 to 2016. Waldron said NAB closed the program to new referrals in July 2016, and the number of introducers is now down to about 1,400. He also gave reasons for the dramatic drop.
One cause is that some introducers had been dormant, meaning they hadn’t introduced a loan for a period. According to Waldron, another reason is that the only loan some had ever introduced was their own, and NAB hadn’t received other referrals from them.
“The third key component for it was they didn’t fit our go-forward model of industries that we wanted introducers to be from, or they couldn’t prove that they were from those industries and may not have held the accreditation for those industries that was there, and so they were removed as well. As well as obviously the introducers that we have already covered in the preceding conversations that were removed because we had concerns about fraud,” Waldron added.
