By Paulina Duran
SYDNEY, Aug 13 (Reuters) - National Australia Bank Ltd NAB.AX charged clients for services not rendered, and downplayed the issue to the corporate regulator to avoid adverse publicity, a powerful inquiry into financial sector misconduct heard on Monday.
Australia's fourth-biggest bank by market value has been questioned for five days at the quasi-judicial inquiry over charging millions of dollars to pension fund customers for advice it did not provide, and attempting to keep the money. records presented to the Royal Commission on Monday showed executives knew in 2016 of the need to refund A$34 million ($24.72 million) to over 220,000 clients, and sought to determine how much of the money the bank could legally keep.
The executives, including Chief Executive Andrew Thorburn, did not disclose the extent of the matter to the Australian Securities and Investments Commission (ASIC) until after NAB published its earnings results for the year through September 2016 to avoid scrutiny and being seen as an outlier versus its rivals, said Michael Hodge, a barrister assisting the inquiry.
ASIC had been investigating fees-without-services since 2015 and had asked banks to provide feedback on a draft report with updated figures. At the same time, NAB had also been looking into the matter and split its internal probe into three parts.
The inquiry heard an October 2016 confidential memo from NAB corporate affairs read: "At this stage having seen the report our thinking is to be reactive from a communication perspective, given that as drafted, NAB is seen as just one 'in the pack' rather than called out as an outlier."
Andrew Hagger, a member of NAB's 11-strong executive leadership team and at the time head of wealth management, said he had told a regulator representative the amount for only one part of the internal probe - about A$12 million - and that the fees involved in the other parts were "a little bit higher", the inquiry heard.
On Monday, Hagger told the inquiry that NAB planned to update the regulator at a later date. He said he believed he had been transparent because he would have revealed the full estimate if the regulator had specifically asked about it.
"I was opening the door to him," Hagger said. "The key was with him to decide what he wanted to ask about."
The unfolding scandal last week drove NAB's chief to apologise on social media for failing "to serve our customers with honour", after documents submitted at the inquiry revealed the regulator was investigating whether to impose a fine. ($1 = 1.3751 Australian dollars)
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ ANALYSIS-Disconnect between fees and performance in focus as Australian pension funds face inquiry
Australian inquiry hears top pension fund defend ad spend, NAB apology