The Australian Prudential Regulation Authority (APRA) has released a Progress Report by the Panel appointed by APRA to conduct a Prudential Inquiry into the Commonwealth Bank of Australia (CBA).

In August 2018, APRA announced that it had established the Prudential Inquiry to examine the frameworks and practices in relation to the governance, culture and accountability within the CBA group.

The goal was to identify any shortcomings in these areas and make recommendations as to how such shortcomings should be promptly and adequately addressed.

What does a Prudential Inquiry look for?

The Panel says it is focused on identifying the key organisational and behavioural factors, or combination of factors, that can explain the public “fall from grace” of an otherwise iconic and financially very successful Australian financial institution. The Panel is seeking to understand any dynamic between CBA’s financial success and any shortcomings in its responsiveness to and management of risk.

The Panel is directing its attention to some particular issues that have emerged from the work to date. These issues include:

• Board (including Board Audit and Risk Committees) and senior executive responsiveness to emerging risk issues and diligence in overseeing the resolution of these issues;
• the influence on CBA’s culture of the Board and senior executives;
• the complexity of policies and decision-making processes within CBA;
• the prioritisation and execution of investment in risk systems;
• capabilities and accountabilities for risk management in the organisation, particularly for operational, compliance and reputational risk;
• the stature, maturity and resourcing of the compliance function; and
• the responsiveness of remuneration to risk outcomes, adverse or positive.

The Panel has reserved its substantive findings and recommendations for inclusion in the Final Report, which will be provided to APRA by 30 April 2018.