SYDNEY • Commonwealth Bank of Australia (CBA) chief executive officer Ian Narev has been stripped of his short-term bonus as the lender battles to contain the fall-out from allegations it breached money-laundering and terrorist-financing laws more than 50,000 times.
The board decided to scrap short-term bonuses for Mr Narev and other senior executives after "consideration to risk and reputation matters impacting the group," chairman Catherine Livingstone said in a statement yesterday. "The overriding consideration of the board was the collective accountability of senior management for the overall reputation of the group."
Mr Narev received a A$2.86 million (S$3.08 million) short-term bonus in the fiscal year ended June 30, 2016, as part of a total remuneration of A$12.3 million, according to the lender's annual report. The 50-year-old, who has led the bank since December 2011, "retains the full confidence of the board", Ms Livingstone said.
The allegations from Australia's financial crime agency of "serious and systemic" non-compliance with money-laundering financing laws threaten to overshadow the bank's full-year results today, when Mr Narev is forecast to report a record A$9.8 billion profit.
The country's financial crime agency, Austrac, sued the bank on Aug 3, saying it failed to report on time, or at all, suspicious transactions totalling more than A$624 million. Commonwealth Bank also failed to monitor suspected money laundering even after being alerted by law enforcement agencies, Austrac claimed.
The lender has blamed a software coding error for most of the alleged financial breaches.
The case adds to a string of scandals in the banking industry, from giving poor advice to wealth management customers to allegations the nation's three other major banks manipulated a benchmark swap rate.
"The latest Austrac revelations add to a list of very serious crises for CBA in recent years, so pulling executive bonuses under these circumstances seems reasonable," said corporate governance specialist at University of Queensland business school Julie Walker.
Non-executive director fees will also be cut by 20 per cent this year in recognition of the board's "share accountability", Ms Livingstone said.
"I don't think this whole 'fire the CEO thing' is the right response every time something goes wrong," said Mr Steve Johnson, chief investment officer at Forager Funds Management, which oversees A$330 million. "But he should get paid substantially less because of it."