APRA has slammed CommBank over events surrounding its alleged 53,00 breaches of anti-money laundering and counter terrorism financing laws.

APRA said the bank's “continued financial success dulled the senses of the institution”.

The report accuses the Commonwealth Bank of having a “widespread sense of complacency, a reactive stance in dealing with risks, being insular and not learning from experience and mistakes”.

APRA also said an “overly-collegial and collaborative working environment” had lessened the opportunity for constructive criticism.

Treasurer Scott Morrison said the APRA report should be “required reading” for all Australian financial institutions.

“It found there was a complacent culture, dismissive of regulators, an ineffective board that lacked zeal and failed to provide oversight, a lack of accountability and ownership of key risks by senior executives, a remuneration framework that had no bite and they were reactive, slow and had under-resourced systems and processes internally,” he told reporters.

“A lack of accountability is a common theme. An inability to identify who is accountable when things have gone wrong. Inadequate remuneration outcomes for adverse risk and compliance outcomes.

“This should be a wake-up call for every board member in the country, particularly those who are the custodians of the savings shareholdings of millions of Australians, they expected better those shareholders of board members and they have been let down, terribly,” Mr Morrison said.

APRA made numerous recommendations for addressing these issues within CBA, focusing on five key levers:

  • more rigorous Board and Executive Committee level governance of non-financial risks;
  • exacting accountability standards reinforced by remuneration practices;
  • a substantial upgrading of the authority and capability of the operational risk management and compliance functions;
  • injection into CBA’s DNA of the "should we" question in relation to all dealings with and decisions on customers; and
  • cultural change that moves the dial from reactive and complacent to empowered, challenging and striving for best practice in risk identification and remediation.

APRA chair Wayne Byres said the inquiry’s findings show CBA’s governance, culture and accountability frameworks and practices are in need of considerable improvement.

“CBA has itself identified and begun taking steps to address many of these issues, but there is much to do and a risk that the same issues which have led to the need for the Inquiry undermine the bank’s efforts to comprehensively and effectively respond to the recommendations,” Mr Byres said.

“As a result, CBA has given to APRA an Enforceable Undertaking which establishes a framework by which CBA will demonstrate it is addressing the full set of recommendations made by the Panel in a timely manner. Until such times as these recommendations are addressed to APRA’s satisfaction, an add-on to CBA’s operational risk capital requirement will continue to apply.

“CBA is a well-capitalised and financially sound institution but CBA itself had acknowledged shortcomings in governance, culture and accountability ahead of this Inquiry. The comprehensive review, and set of recommendations set out by the Panel, provides CBA with a clear path towards restoring its public standing,” Mr Byres said.