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Commonwealth Bank of Australia’s Internal Issues Research Paper

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Updated: May 1st, 2021


The Commonwealth Bank of Australia is one of the most widely known financial intermediaries in the country. However, the situation with clients’ trust in CBA and other organizations in Australia has worsened after a series of scandals (Australian Prudential Regulation Authority 3). The Australian Prudential Regulation Authority wanted to help CBA analyze its current position and identify the most important opportunities to improve the level of trust and prevent client attrition.

Types of Problems Identified and Their Impact

Specialists from APRA conducted research and prepared a report focusing on existing problems and potential solutions. Presented in April 2018, the final report discusses a range of findings in a detailed way and is divided into chapters that characterize all types of problems (Australian Prudential Regulation Authority 8). The first type of internal issue includes problems related to governance. They include a lack of effective risk oversight practices for non-financial risks, the Board members’ “overconfidence” in decision-making, and inadequate use of benchmarking techniques (Australian Prudential Regulation Authority 96).

In the case of CBA, APRA shows that such problems arise due to managers’ low “capacity to self-reflect” and learn from the outcomes of their decisions (Australian Prudential Regulation Authority 87). With this in mind, significant work is required to make the Board use self-criticism as a driver for success.

The next set of problems is related to the distribution of responsibilities and accountability at CBA. As identified in the report, these problems include the lack of a clear risk ownership framework at the senior level. Due to this, there are issues with reporting incidents and new risks, and the process of resolving these problems (in particular, the speed of response) should be improved (Australian Prudential Regulation Authority 97).

The separation of duties and accountability for risks can present problems due to the peculiarities of companies’ internal structures. For instance, when it comes to CBA, such issues can be attributed to its being a federated organization, which provides agility but involves divided governance (Australian Prudential Regulation Authority 59). CBA is a large financial organization; it is among the top banks by market capitalization (Willcocks and Reynolds 87). Considering its size and complex internal structure, a clear accountability strategy is needed to avoid conflicts between business units.

The report by ARCA touches upon a number of problems related to the corporate culture of CBA. These issues are evident in the organization’s undesirable cultural traits such as “a sense of complacency,” a reactive approach to risk management, and a failure to analyze past mistakes (Australian Prudential Regulation Authority 4). The emergence of these traits in financial intermediaries can be attributed to a variety of factors, ranging from a low level of competition in financial services to leadership issues (Adams et al. 203). For instance, in reference to CBA, these weaknesses were believed to be caused by a lack of collaboration with expert advisors and overprioritizing the need to reach consensus (Australian Prudential Regulation Authority 89).

The aforementioned problems impact both the organization and its clients in a variety of ways. For issues related to governance and accountability, the limited attention given to the analysis of non-financial risks and burden sharing can cause conflicts between different departments. The so-called “intangible” risks have to be analyzed by financial services organizations to avoid significant financial losses related to compliance issues and damage to reputation among customers (Kaminski et al. par. 3).

In reference to CBA, its problems with bureaucratic decision-making resulted in a series of scandals related to money laundering activities and the security of transactions (Eyer’s par. 1; Australian Prudential Regulation Authority 3). Unquestionably, the cases have had a severe impact on the bank’s reputation, leading many clients to change their financial services provider. Due to AUSTRAC’s legal action, it was found that some of CBA’s remuneration principles were not constructed with regard to customer interests (Australian Prudential Regulation Authority 3).

The Role of Regulation in Addressing Problems

Regulation plays an important role in identifying and addressing internal problems that impact financial intermediaries. Such problems contribute to the destabilization of organizations in the banking sector, which can pose a threat to the financial well-being of an entire country. With that in mind, governmental and independent regulatory agencies are interested in providing objective analysis and effective recommendations for improvement.

APRA works with a variety of financial organizations in Australia to ensure that these companies’ organizational structures and commonly used practices provide reliable and customer-centered services. Its report contributes to addressing three types of problems by providing recommendations based on the results of case studies and interviews (Australian Prudential Regulation Authority 3). The role of regulation in the promotion of positive changes cannot be overstated since such recommendations can form the basis for CBA’s new corporate strategy.

Actions for Problem Identification and Improvement Opportunities

Problems caused by ineffective governing practices and the specific features of organizational culture can be identified and rectified with the help of professional advisors. As for CBA, the actions that it has taken to perform these tasks include providing regulatory agencies with access to internal documents and the implementation of detailed recommendations. In order to restore the company’s image, specialists from CBA actively collaborate with APRA and other market players.

Seven years ago, both APRA and an external company provided CBA with feedback concerning control gaps in some business units, and CBA implemented a project to address them (Australian Prudential Regulation Authority 42). However, some actions taken by CBA to rectify the problems discussed by APRA were not extremely successful. For instance, the project mentioned above was not implemented in a timely manner. Instead, CBA needed more than twenty months to manage the problem, probably due to a lack of coordination between various units (Australian Prudential Regulation Authority 42).

The success of some of CBA’s actions intended to rectify the existing problems cannot be evaluated yet since many initiatives have only recently been announced. Despite this, they are indicative of the company’s readiness to collaborate with ARCA. CBA’s reaction to the most recent report issued by APRA was extremely positive. Its CEO apologized for not meeting customer expectations and promised to implement all recommendations given by APRA and monitor changes carefully (Commonwealth Bank of Australia par. 2).

To improve industry practices in the area of problem identification and rectification, it is important to provide CBA with assistance in data collection and the creation of centralized databases. The inability to coordinate the efforts of different departments to collect data needed for issue identification was among the reasons for the failure of CBA’s efforts (Australian Prudential Regulation Authority 40). Addressing this issue may possibly prevent CBA from making further mistakes that will affect its reputation.


Ultimately, the report prepared by APRA revealed a range of problems with accountability, governance, and culture that CBA has not yet managed to solve. By utilizing a set of recommendations related to leadership, collaboration, and the subdivision of responsibility, CBA is expected to develop a stronger organizational structure. Addressing the issues highlighted by APRA should also help with building more trust-based relationships with clients and maintaining CBA’s leadership in the banking sector.

Works Cited

Adams, Michael, et al. “Chartered Secretary: Leading from the Top: The Missing Piece in Nurturing Good Corporate Culture?” Governance Directions, vol. 69, no. 4, 2017, pp. 203-206.

Australian Prudential Regulation Authority. . 2018. Web.

Commonwealth Bank of Australia. “.” Commbank. Web.

Eyers, James. “.” Financial Review, 2018. Web.

Kaminski, Piotr, et al. “McKinsey & Company, 2016. Web.

Willcocks, Leslie, and Peter Reynolds. “The Commonwealth Bank of Australia – Strategizing from Outsourcing to the Cloud Part 1: Perennial Challenges Amidst Turbulent Technology.” Journal of Information Technology Teaching Cases, vol. 4, no. 2, 2015, pp. 86-98.

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