Big Four in firing line following CBA's epic fail

The entire sector could face an overhaul following CBA's scandal.

The Commonwealth Bank is in a world of trouble with both the Reserve Bank (RBA) and the Australian Securities and Investments Commission (ASIC) setting its sights on the bank in the midst of damning money-laundering allegations made by Austrac.

Read more: Commonwealth Bank in hot water over ‘serious’ breaches

CBA may also be facing class action from investors as it’s come to light its own board neglected to disclose a money laundering investigation for more than two years which was the ultimate catalyst for the $5.5 billion collapse in the bank’s share price when Austrac launched its case.

ABC News reported that class action lawyers were circling the CBA saga as more details emerge about just exactly what CBA executives and board knew, and when.

Read more: Let’s Talk: Who should have been fire for CBA’s stuff up? 

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Meanwhile, ASIC chairman Greg Medcraft is also looking into taking action regarding CBA’s disclosure or lack thereof.

Medcraft said today that the watchdog was looking into key legal questions raised since the CBA scandal erupted over the past week.

He told a parliamentary committee in Sydney today that ASIC was taking the entire thing “very seriously”. 

“We have laws for reasons, banks should not be doing money laundering and they should know who is opening their accounts,” Medcraft told the committee.

The Sydney Morning Herald reported that ASIC would look at key questions including whether: 

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  • bank staff and directors breaches their duties under the Corporations Act;
  • CBA complied with continuous disclosure laws;
  • the bank complied with licensing obligations to act efficiently, honestly and fairly;
  • the bank complied with financial reporting duties, including whether the potential fine should have been treated as a contingent liability in the CBA’s accounts.

In addition to ASIC looking closely into CBA’s dealings, the RBA is gunning for an entire overhaul of the banking sector with its governor, Philip Lowe slamming it for its short-term profit mindset and cultural collapse. 

Read more: Commonwealth Bank executives hit where it hurts

“Service has taken a back seat to sales,” Lowe told the Senate economics committee in Melbourne today.

“The desire for short-term profit has meant not enough attention is being paid to risk management, trust has been strained, banks know that.”

While Lowe did not comment specifically on the CBA allegations, he did say the sector needed to be held accountable for its actions.

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