Australia's NAB says incentives 'root cause' of fraud

From Reuters - March 13, 2018

SYDNEY (Reuters) - National Australia Bank Ltds (NAB.AX) system of bonuses and incentives encouraged bankers to engage in fraudulent lending practices to boost their incomes, NAB told a powerful judicial inquiry into the scandal-ridden sector on Wednesday.

Scrutiny of the banks various incentive schemes dominated the second morning of testimony at the Royal Commission in Melbourne, where the countrys fourth-biggest bank conceded falsified mortgage documents were used to help people collect bonuses and commissions and beat sales targets.

So from a very early point, NAB was aware that a driver for these ... fraudulent behaviors was its own remuneration structure, Rowena Orr, a barrister assisting the inquiry, said on Wednesday.

Under questioning, senior NAB executive Anthony Waldron said the structures were certainly one of the root causes.

NAB disclosed in documents that some employees accepted over-the-counter cash bribes to facilitate loans based on fake documents.

Theres been breakdowns right throughout the end-to-end process here for the application of loans, Waldron said.

Financial incentives and poor lending practices are expected to feature prominently in the potentially explosive year-long inquiry into the financial sector and especially the Big Four banks, which dominate the countrys A$1.7 trillion ($1.36 trillion) mortgage market.


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