The aggressive sales-and-bonus culture that triggered the financial crisis overseas hit Australia hard, too, a Parliamentary Inquiry learned this week. Hearings in Townsville heard how Commonwealth Bank ramped up sales targets, hoping to wring more and more business from Storm Financial.
The Parliamentary Inquiry into financial products and services was told that Northern Queensland area Commonwealth Bank sales targets soared by $170 million in 2008-09. The target of $750 million in lending was equivalent to Brisbane city, which had more than twice as many lenders.
The Inquiry, which has hearings in Sydney on Friday, also heard how a Commonwealth audit of 600 Storm Financial-related lending files found no discrepancies in bank procedure.
“What the Inquiry heard this week completely undermines the bank’s claim that one or two rogue lenders caused this financial pain,” Finance Sector Union National Secretary Leon Carter said. “It blows the lid off a systemic, sales-and-bonus culture that pervades our industry. It triggered the US mortgage and global financial crisis and cost thousands of Australians their savings. It needs to stop.”
Mr Carter noted the bank’s claims that the problems associated with Storm are simply an isolated problem are clearly wrong. The sales targets for North Queensland were imposed by the State Manager in full knowledge of the business Storm was providing. The manager in turn would have been responding to head office executives’ growth targets.
He said the hearing is revealing serious shortcomings in the finance sector directly related to remuneration models, much like the US experience, and must be taken on board by Treasurer Wayne Swan, who is attending G20 talks in London about strengthening financial regulations.
“This week, we heard evidence of systematic failure caused by pursuing aggressive sales targets,” Mr Carter said.
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