The Australian Securities and Investments Commission (ASIC) has expressed disappointment at the failure of National Australia Bank to fully implement a reform programme linked to an Enforceable Undertaking (EU) levied by ASIC after deficiencies were found in its wholesale FX business.
NAB, along with the other major Australian banks, were fined by ASICin December 2016 for a series of failures in their FX businesses, including attempts at front running orders, manipulating fixes and inappropriately sharing confidential information.
In an announcement this week ASIC says it has accepted a “variation” to the EU, which imposes additional undertakings on the bank after an independent expert’s report identified “significant deficiencies” in NAB’s remediation program developed as part of the original EU.
Under the original EU, NAB was required to develop a programme of changes to its existing systems, controls, monitoring, training and supervision of employees within its spot foreign exchange business to prevent, detect and respond to certain types of conduct. The programme and its implementation was to be assessed by an independent expert.
In accordance with the EU, NAB provided its programme of changes on 28 November 2017, however on 29 March 2018, the independent expert reported noted significant deficiencies regarding the bank’s governance, risk management and compliance framework; policies and procedures; risk management practices; and human resource management.
ASIC says the independent expert concluded that it was unable to complete the expert assessment of the programme’s effectiveness required by the EU because, “NAB has made incomplete progress in designing items to be included in the programme”.
The expert’s report states “progress in developing the programme has been slow” and that the it “appears to have evolved iteratively during 2017, rather than through a well-defined process”.
The report adds as an example, that there appears to have been no comprehensive risk assessment across NAB’s spot FX business against the EU requirements and relevant regulatory standards and guidance.
The variation of the EU imposes an additional undertaking on NAB to prepare an updated programme that adequately addresses all required components, this will then be subjected to further assessment by the independent expert. After these new undertakings are satisfied, NAB will be able to progress with the undertakings in the original EU.
“ASIC is disappointed with the delay in the development and assessment of a remediation program to address the conduct outlined in the EU,” says ASIC commissioner Cathie Armour. “However, we are pleased that the process has been sufficiently robust to ensure any ongoing deficiencies have been identified and are being addressed, with oversight by an independent expert. ASIC’s ultimate objective is to ensure NAB has effective mechanisms in place to adequately train, monitor and supervise its employees to provide financial services efficiently, honestly and fairly.”
NAB’s group chief risk officer David Gall, says, “We welcome the feedback received from the independent expert in its initial report, which has helped us identify areas where we can do better to implement the program of changes.
“The programme of changes to our spot FX business is a crucial component of simplifying and improving the effectiveness of the bank’s controls and risk management systems, so that customers can continue to have full confidence in doing business with us,” he adds. “We strongly support a well-functioning and fair global FX market, and take our role in upholding transparency and efficiency seriously.”