Billions To Repay Customers Being Set Aside By Scandal-Hit Australian Banks

Having found guilty of charging doggy fees from their customers for years, the big banks of Australia are now preparing to amass huge sums of money worth billions of dollars for repaying the cheated customers. The Australian banks were once considered to be amongst the most profitable in the world.

The latest Australian bank to highlight and talks about the increasing costs that would have to be incurred for refunding the cheated customers following after being indicted by a government probe into the sector was the heavy weight in the banking industry the National Australia Bank.

On Thursday, the bank announced that the case had forced it to set aside A$1.1 billion (US$770 million) for the purpose of reimbursement of customers during the last financial year.

The Australian government has set up a Royal Commission – the highest government investigation in the country, which conducted investigations into the issue for more than a year and found out rampant incidents of malpractice by the banks which also included charging fees from dead people, extracting fees from customers even while no service at all is provided by the banks, aggressive selling tactics and poor financial advice which resulted in significant financial losses for the clients.

NAB was identified for some very harsh comments after the year-long investigation which resulted in the ouster of the CEO and the chairman of the company.

It “forced us to confront broader issues of how we treat customers”, the bank said in a statement Thursday.

Since the first half of the 2017 financial year, in addition to setting aside A$928 million in remediation costs, NAB’s competitor ANZ has also already contacted more than 276,000 customers, the bank said in a communiqué earlier this week. Similar steps have also been taken by other indicted banks including Commonwealth Bank and Westpac.

According to an estimate about the total refund amount by Macquarie Research, the total cost for the sector could be as much as A$6 billion. The banks’ bottom lines is already being impacted by the costs even though those are just a fraction of the total revenues generated by the banks. This is especially troubling for the banks because there has been a slow down in the housing market and the banks are also being directed to increase their capital holdings.

In order to protect the bank’s balance sheet during a “challenging” period, the “majority” of management bonuses have been postponed and a 16 per cent cut in the shareholder dividends have been announced made by the NAB, the bank said while announcing its half-yearly earnings.

With the total provisions for remediation costs being A$1.1 billion, A$525 million for “customer-related remediation costs” have been put aside by NAB in the past six months, the bank said.

There was “potential for additional costs, although the amounts and timing remain uncertain”, the bank also said.

(Adapted from ChannelNewsAsia.com)

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