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Australia's NAB says no money kept for "fees for no service" lawsuit
[SYDNEY] National Australia Bank, the country's No.3 lender, said on Wednesday it did not have cash set aside to settle a lawsuit accusing it of charging customers fees for no service, but added it had already started paying them back.
A day before NAB's annual meeting, the Australian Securities and Investments Commission (ASIC) filed a lawsuit accusing the bank of charging financial planning customers fees without giving them any service nearly 9,000 times in the six years to February.
The corporate regulator did not disclose how much it wanted to fine the bank but penalties could theoretically total up to A$9.75 billion (S$8.97 billion), according to figures it provided, equating to about one-eighth the company's market capitalisation.
"It's very late breaking news, but we are exploring it in depth," NAB Chairman Philip Chronican told shareholders at the meeting in Sydney.
Chronican said figures given by the regulator added up to a hefty fine but most of the wrongly charged fees affected just a few hundred customers, so "while it's possible to extrapolate and get a very large penalty based on the law, the substance of what's being alleged is materially less."
The matter would need to go to court for adjudication, he added.
"We have not made any provision in the financial statements ... for it but we have provided for the underlying customer remediation," he said.
In prepared remarks earlier in the meeting, Mr Chronican said the bank had returned A$276 million since June 2018 to customers charged fees for no service. The bank has said it has set aside a total A$2.09 billion to repay wrongly charged fees.
Mr Chronican took the role earlier this year following the departure of the bank's previous CEO and chairman in the wake of an industry-wide financial misconduct inquiry.
The issue of charging customers fees without providing a service was a major theme in the Royal Commission inquiry.
Since larger rival Westpac Banking Corp was accused last month of enabling millions of transactions in breach of money laundering laws, NAB has faced pressure to disclose whether it is aware of any similar investigations from the financial crime watchdog AUSTRAC.
Mr Chronican told the meeting the bank had a "close and constructive relationship with AUSTRAC" but had not always met 100 per cent of their requirements, without giving further details.
NAB shares were down 0.9 per cent in early trading, while the broader market was marginally higher.