Commonwealth Bank of Australia Chief Executive Officer Ian Narev will step down by the end of June 2018 as the nation’s largest lender seeks to mitigate the fallout from a money-laundering scandal.

The exact timing of Narev’s departure will depend on the search for a successor, with the board looking at both internal and external candidates, Chairman Catherine Livingstone said in a statement Monday. The board was detailing the succession plan to “provide certainty for the business,” she said.

Pressure is building on Commonwealth Bank amid allegations by the nation’s financial crimes agency that drug syndicates used its network of deposit machines to launder cash, despite warnings from police. The nation’s securities regulator opened its own inquiry last week and the governor of the central bank called for accountability in the banking industry, which is beset by a string of scandals.

Narev, 50, has presided over a market-topping stock price since he took the helm at the start of December 2011. Last week, he delivered the lender’s eighth consecutive record profit.

Commonwealth Bank shares rose 0.7 percent to A$81.03 at 10:06 a.m. Sydney time. The stock has fallen about 4 percent since the money-laundering suit was lodged Aug. 3.

Yet his achievements have been overshadowed by the money-laundering allegations -- the third major public-relations scandal he has faced as CEO. The bank has paid A$29 million ($23 million) in compensation to customers who were allegedly given poor financial advice, and has faced accusations it wrongly failed to honor insurance claims to sick clients.

Narev’s successor must move swiftly to restore trust, according Raymond Lee, a Sydney-based money manager at Kapstream Capital.

“Step one is obviously to clamp down on the scandals so that reputationally the bank is held in good stead,” Lee said by phone.

The financial crime agency, Austrac, alleges that Commonwealth Bank failed to report either on time or at all suspicious transactions through its network of automated cash deposit machines totaling more than A$624 million, and it failed to monitor the activities of drug syndicates even after being alerted by police. The bank has blamed most of the breaches on a software coding error which has since been fixed.

The allegations are the latest in a series of scandals in Australia’s banking industry, ranging from giving poor advice to wealth-management customers to allegations the nation’s three other biggest banks manipulated a benchmark swap rate. The opposition Labor party has jumped on the money laundering claims to bolster its calls for a far-reaching inquiry into the banks.

Narev, whose short-term bonus for the past financial year was cut, said last week he didn’t intend to resign. Narev’s total pay was slashed by more than half to A$5.5 million in the 12 months ended June 30, from A$12.3 million the previous year.

Livingstone said succession planning was an “ongoing process” and that following discussions with Narev it was agreed it was “important for the business that we deal with the speculation and questions about his tenure.”

“Today’s statement provides that clarity and will ensure he can continue to focus, as CEO, on successfully managing the business,” she said.

Source:
courtesy of BLOOMBERG

by Emily Cadman

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