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NAB CEO and ex-BNZ CEO Andrew Thorburn cancels leave, says he will 'personally and visibly' lead response to stinging Royal Commission criticism

NAB CEO and ex-BNZ CEO Andrew Thorburn cancels leave, says he will 'personally and visibly' lead response to stinging Royal Commission criticism
Andrew Thorburn.

Under fire bank boss Andrew Thorburn says he will "personally and visibly" lead the response of BNZ's parent National Australia Bank (NAB) to Australia's banking Royal Commission.

In a statement Thorburn, BNZ's CEO between 2008 and 2014, says Commissioner Kenneth Hayne's criticism of NAB in his final report is "very hard to read."

"...the Commissioner has expressed his view that we at NAB may not be learning the lessons we need to from the past and, in particular, that we don't know what the right thing to do is," Thorburn says.

"As the CEO, this is very hard to read, and does not reflect who I am or how I am leading, nor the change that is occurring inside our bank. While we have made mistakes, I believe there is a lot of evidence that we are making sustainable and serious change to once again regain the trust of our customers."

"I am proud to be a banker; it has always been a profession of service. I am proud to be CEO of NAB, and am more determined than ever to lead NAB with even greater urgency and intensity and show through our ongoing actions that we do what we say," Thorburn says.

"I have cancelled my planned long-service leave, aside from a personal family commitment next week. I will lead this personally and visibly, and alongside NAB's 33,000 employees who share my determination to be better for customers."

NAB 'stands apart' from the other three major banks

In the final report Hayne said NAB "stands apart" from the other three major banks, saying; "Having heard from both the CEO, Mr Thorburn, and the Chair, Dr Henry, I am not as confident as I would wish to be that the lessons of the past have been learned." 

"More particularly, I was not persuaded that NAB is willing to accept the necessary responsibility for deciding, for itself, what is the right thing to do, and then having its staff act accordingly."

 I thought it telling that Mr Thorburn treated all issues of fees for no service as nothing more than carelessness combined with system deficiencies when the total amount to be repaid by NAB and NULIS on this account is likely to be more than $100 million," Hayne added. 

"I thought it telling that in the very week that NAB’s CEO and Chair were to give evidence before the Commission, one of its staff should be emailing bankers urging them to sell at least five mortgages each before Christmas. Overall, my fear – that there may be a wide gap between the public face NAB seeks to show and what it does in practice – remains."

In its Tuesday statement NAB notes Hayne's final report references matters concerning the NAB Group that have been "referred to the relevant regulator." The bank says it will "engage constructively" on these matters.

Thorburn's time at BNZ's helm covered the Global Financial Crisis, plus the devastating Christchurch earthquakes, and subsequent earthquakes that damaged BNZ's Harbour Quays building in Wellington. He was popular among BNZ staff and appeared to be respected within the banking sector.

Here's Thorburn as BNZ CEO in 2012 speaking about  "fundamental anomalies" in the New Zealand tax system that favoured residential property, and arguing a lack of leadership was the main problem in the housing affordability "crisis." And here he is from earlier in 2012 discussing bank profitability in a video interview.

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Out of interest - what is his salary?

About A$4.5m. But that's not much, really. Others inside the NAB earn more than that.
I actually have sympathy for the predicament that Thorburn found himself in. He didn't create the current NAB mess; others, who earned more and retired on more, did.
He's given it a good shot at a cleanup. But where would one start? FX debacles of not that long ago, and Central bank hoofing debt at all and sundry through the retail banks to keep The System afloat. What was he supposed to do? The same as all the rest - here, there and everywhere. It's like economists - they are all trained in the same way, at the same institutions ( they all go to 'Harvard" to do a business top up of one sort or another) and report to the same-thinking regulators.
He'll go, of course, and shoulder the responsibility as all good leaders do. But the rot will remain and whether his successor can do better, only time will tell.

Must be tough to get by on A$4.5m - especially when your business makes record profits year on year creating money out of thin air and forcing society into debt slavery. The whole system is broken.

"The whole system is broken." No arguments with you there.
But running one of these outfits is like being an airline pilot ( used to be!). The pressure is immense. Not everyone can or would want to do it, so hence the apparently big salaries. They have to make what they can before something, like this even, hits and do it whilst they are relatively fit and young. For most, it's over after they get so far.
What most people don't see are the broken bodies of those who didn't make it along the way. The pressure that makes an aspiring director drive into his garage when he gets home; shut the door and leave the engine on. ( real case) and there are heaps of another example.
A$4.5m is a lot to most people, but there are costs on the other side as well.

Incentives are completely so hard that a) you make it get paid a rediculous of money while becoming morally corrupt. b) don't make and in the process become morally corrupt and sick.

The persuit of profit is corrupting the system and society. Rules must be changed. Those salaries are bloody rediculous and everyone knows it. And how stupid are people to chase that type of money and destroy their health in the process? Modern bankers = Idiots. But unfortunately those idiots are taking all of society with them.

How much do you think it costs to pay the salaries each year of these combined turkeys who all all running around destroying their health? Now imagine if we didn't have to pay them this stupid wages - operating costs of banks would reduce significantly - system would become effieicnt - lending would become cheaper - people wouldn't become morally corrupt and sick. Soceity would become happier and healthier. Our banking culture is dragging down the quality of our society.

Out of curiosity bw. What would your ideas be of how to fix/change this broken system?

Nationalise the whole lot! And start again.
At the very least reintroduce Exchange Control measures, and de-float the currency.
Clamp down hard on fractional reserve lending.
You won't fix anything if even one bank is left to operate on its own.
Privatise it again when a change has been made, and keep an eye on it this time.

But in a Global environment, we'd see ourselves excluded, and punished Brexit style, for daring to challenge the status quo.

Nice, I agree with a whole lot of that. Do you think banks would still need to be nationalised if you removed fractional reserve lending though? If you take away their funny money they would naturally be forced to behave.

How much do you think the average NZ house is actually worth if remove fractional reserve lending?

does not compute.....please explain.

@Independent_Observer. Personally I'm not clever enough to work that out myself so I've searched for others research. Martin North from DFA came to the conclusion that 27% weighting was attributed to
all personal credit," 18% investment credit etc.. (see link below) that contributed to house price growth in AU. I would think the numbers would be similar in NZ.

The answer also depends on If we never had fractional reserve lending or if we removed it now. Removing it now we would have a massive problem if nothing was implemented in it's place (something like the "Chicago Plan" for example). Long story short, fractional reserve is one rather large, systemically important ponzi.

Disappointed Withay - was expecting some mathematics and an exact number....

Just trying to make a point that we're paying our bankers a lot of money to run a ponzi - which if we think critically about that - its completely absurd.

And if they weren't running a ponzi - house prices would be much better regulated and non-speculative. And bank CEO's couldn't justify being paid millions a year simply because of growth of credit supply and the promise of people to continue to pay more money each year to the banks (forever...)

haha apologies for letting you down.

I prefer to think of what banks do as "generously letting you borrow your future earnings and paying them for the privilege."

Your absolutely right though, It is completely absurd. I wish a light would be shone on this so the general population would understand. So many of our societal ills come from this.

Well said Withay. The housing affordability issue for purchases and rentals is actually that only those in the upper earnings brackets can either afford the credit (which is on ridiculous multiples) to buy.... or earn enough to pay the ridiculous credit that the landlords have taken on to pay for 'cash flow' rentals' that then yield them $30 a week on interest only mortgages..... its a very fragile system.

factional reserve banking does not exist in NZ or Australia.

Agreed AJ
The myth of fractional reserve banking, still taught at universities today.... actually died in the 1990's.

Interesting, what replaced it?

Of course it does, it may come under another name as there are technically no reserve requirements for Australian banks, however this is semantics. If fractional reserve banking did not exist then there could never be a run on any Australian or NZ bank and the banks could not exercise leverage…
The confusion results from people thinking fractional reserve banking means banks’ lending out money they don’t have from depositors, this is not the case. If I deposit 100k into bank A this allows it to create a loan to someone (Mr X) of say 90k (leaving 10% in ‘reserve’) this 90k then becomes a deposit to someone else perhaps in the same bank, so the loan has created a deposit. If Mr X and myself were to meet and compare funds we had access to I would say I had 100k and he would say he had 90k… Good luck if we both decide to buy something together for 190k. His 90K is a new deposit somewhere which could allow another loan to be made. The loan is the bank purchasing a security (a promissory note) from the borrower. The commercial banks of NZ and Australia are the very definition of fractional reserve lending as are all commercial banks the world over.

Another example - like the flawed EROEI debate - where no price variable is used in the argument.

All banks charge more for interest on a loan than they offer on deposits.

For the supposed credit creation example listed above to work someone would have to borrow at say 6 % then re-deposit at 4 %.

How often do you think this happens in the real world ?

uh, take away fractional reserve banking and then the banks can only lend out what they take in, our economy couldnt survive like that I believe.

Check the balance sheet of any bank - as the RBNZ does regularly - and you will see that banks only ever lend out less than their deposits plus equity and reserves.

Economy has survived like that for many years past and will into the future.

Not correct. It's fractional reserve and most of the 'fraction' is quite capable of being re-valued downwards.

Well I think we'll disagree on that.


Yes, and let's say they lend out 50% of their deposits, do the deposit holders see their deposits reduce by 50%, or is the same 100k you deposited still showing up on your computer screen. Welcome to fractional reserve banking.

@steven. Take away fractional reserve lending and the economy wouldn't survive? The industrial revolution happened under the gold standard lest we forget. It's not the increasing supply of money that pushes an economy forward, it's just a measuring tool. Thats like saying building will increase if we increase the number of centimeters to a meter on a tape measure.

They still levered off the gold - eventually the lever was so ridiculous that they cut the rope. Nixon acknowledged the reality about 1970.

Yes there was fraud all throughout history but nothing like what we have now. Again, money is just a measure. It can be manipulated through credit creation to take from one area and direct it to another where either a central bank or a government wants to target growth but it is not the real driver of growth or productivity. A measurement is just a measurement and in economic terms there is great value in a stable measurement (currency/money).

back out of the neo-liberal claptrap Raygun and Thatcher instigated. ie get back to the checks and balances put in place after the great Depression to make sure a Great Depression never happened again.

Oh and pilots generally have to take responsiblity not golden handsakes if something goes wrong and the plane crashes. If we pay these guys/girls millions of dollars a year - if it turns out they've been behaving without customers/societies best interests at heart - throw them in jail. Return the wages to customers/society.

As I said, "no argument from me".

But what would you do? If you had worked through a System that you believed in, hard, because you really thought it was 'the way to go', and then you are offered, I don't know, call it $10,000,000 to be the CEO of Megabank NZ. Firstly. Do you take the job at the salary offered?, Secondly: If you did then find out some of the 33,000 people that work 'for you';( whose livelihood and that of their families depend on every decision you make), are 'doing the wrong thing' and that by removing them; changing the System will put those other staff members lives at risk. What would you do?

Now that's just one consideration. I could go on, but having been through exactly what Thorburn was faced with, I can tell you, if you try to make a change, change will come to you and not the System. Buck it, and you're out. So do you instigate swift change? Or do you do the best you can, to change things incrementally? Thorburn tried the latter by the look of it. I chose the former, and I can tell you, it's a costly decision whichever way you turn, on every level.

Look if I was earning $4.5m a year I know that if I even just did that job for 6 months I'd be set for life. So - after that point why be greedy? Why not put your balls on the line and do the right thing? If making record profits year on year in an environment like that is something you choose to do, you live with the consequence of that - I don't think any pity should be given to this. If you want the pay - you do the job. And in the future corporations have to be socially responsible. Creating credit bubbles while making record profits isn't socially responsible behavior. And if you don't have the balls to stand out from the crowd and speak up for what's right - then what the hell are you doing in a leadership position in an organisation? Although an observation is that because people have mortgages, and children to support - they appear willing to do anything for money including not staying true to their own value systems/principles. We each need to live with our decisions at the end of the day.

Gandhi - be the change you wish to see in the world.

Ultimately I think our banking leadership like being fat cats - they don't want to change because the incentives are wrong - system is broken. Massive change is required.

"National Australia Bank chief executive Andrew Thorburn has copped a $2.1 million pay cut as a result of the fallout and potential criminal misconduct emerging from the financial services royal commission. 
While the haircut is the biggest of any major bank chief executive, Mr Thorburn still made $4.3 million in the year to September 2018, down from $6.4 million in the prior corresponding period."

Andrew Thorburn's comments have elements of surprise, a lack of comprehension, and denial.
Clearly he is part of a culture that has normalised what are unacceptable behaviours.
He was - or should have been - well aware of what are well known and unacceptable practices; so yes, by allowing such behaviours to continue it is a reflection of who he is and his values.
The same was with Richard Klipin's pathetic response in his recent interview - "this has just landed on my desk today"and it will take time to digest and comment. Shock, horror! You mean he had no knowledge that "churning" was a totally unacceptable behaviour and didn't see it coming until "surprised" on the day by the FMA/RBNZ report.
I doesn't give confidence that there will be change in organisations when the CEO's can't readily recognise and admit to elements of poor culture.

Of course they know, but they can't be seen to know.

They can't say "Oh yeah, we knew we were ripping our customers off, but it was so damn profitable we just didn't want to stop. My bad. We'll look into it and totally change, I promise."

Trying to claim the moral high ground when there is none to be had.

In the 1980’s on a Qantas flight I read a Bulletin article headlined “Why the Banks are Bastards.” Round about a year later the same magazine headlined “Why the Banks are Still Bastards.” Worked myself for an Australian bank 1960/70’s. Then tightly regulated, and run pretty ethically too. Over here Douglas, over there Keating, deregulation and banking morphed into quite a different beast. Ironically when the lending restrictions were relaxed, it was revealed that the banks did not really know how to lend. Remember the huge losses post 87 crash. Remember our own BNZ crashed and burned, bailed out by the Bolger government, no questions asked and sold off hastily to the NAB. Ask Winston about that, he will remember!

Reminds me of a scene out of Saving Private Ryan where the german soldier is waist deep digging his own grave and thinks that if he digs faster the Americans will take pity...

the difficulty that Haynes has is fundamentally a bank is a business, and those running the show are acting for shareholders’ to maximise return. As a result, most bank systems and processes are geared around ensuring that this happens. Haynes wants to dispense with capitalism and turn a bank into a socially responsible vehicle. Not possible. The two are diametrically opposed. As an aside we have been practising banking in one form or another for around 4,000 years. The problem of allocating the right amount of credit, at the right price, to the right individual has never been resolved. And it will never be imho.

We'd be better off without banking and without interest. After all, it's key-stroke-generated debt they issue and it's real stuff done by real people in the real world, that they suck a percentage off. It's the rort of all time, besides being a driver of unsustainability in the macro sense.

Fan...brown sticky hitting and splatt. Service to profit and bonuses more like it. New reg are coming and its election year as well. Guessing Aussie opposition will promise a lot or new oversight for the new whipping boy in Australia.

Aussie cricket and rugby teams are happy ro pass mantle of public enemy number one elsewhere.

How long either remain at Nab is largely irrelevant (Henry is toast in my view), what matters is both their legacy's are deeply tarnished and they will be locked out of high profile directorships in the future. When you no longer have to worry about the bills, this matters and will hurt them both a great deal personally.

Lots of good stuff above & there's at least two sides to this story.
Capitalism is a wonderful system for making the rich richer. If it is a great system, it will make those in the middle richer. Has it done that? I think it has. It also has issues, but that is, & was, always the case. Greed was always going to get in the way, especially when you have a booming economy like Australia's for almost 3 decades, with no forced checks (recessions) in the system. Australia is, behind China, one of the new (few) millennium success stories, & that is on the back of China mostly, but hey, that's what happens when you're the Lucky Country.Where to from here? Well, there's an election in Oz this year & it's not hard to see Labour winning. The Liberals are a hot mess. Not that it will improve anything, but it probably is a good time for a change. If they're got any balls they will hang, draw & slaughter everyone they can, but after seeing what happened in America & Europe 10 years ago it will probably be tokenism, which is exactly what we saw from the royal commission last year if I was truthful. If anyone can literally get away with murder it's the banksters. Sadly, my cynicism has proved to be correct more often than not over the last 20 years. I do not see it being any different here.

I'm convinced one huge problem is internal hiring of executives and senior managers: Kiwibank got their CEO from ASB, ASB got their CEO from CBA, CBA got their CEO from their consulting company McKinsey etc. etc. There is almost no one left from outside the industry to actually lead change in these institutions for the better and, clearly, history has shown they can't transform their own behaviour.