Commonwealth Bank

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Commonwealth Bank of Australia
Type Public
Traded as ASXCBA
Industry Banking, financial services
Founded 1911 as a government bank
1991 as a public company
Headquarters Sydney, Australia
Area served Worldwide
Key people David J Turner, Chairman and Ian Narev, CEO and Managing Director
Products Finance and insurance
Consumer banking
Corporate banking
Investment banking
Investment management
Global wealth management
Private equity
Mortgages
Credit cards
Revenue Increase A$21.50 billion (2013)[1]
Profit Increase A$7.677 billion (2013)[1]
Total assets Increase A$753.876 billion (2013)[1]
Employees 44,844 (2012)[2]
Divisions Retail Banking Services, Business and Private Banking, Institutional Banking and Markets, Wealth Management, International Financial Services.[1]
Subsidiaries Bankwest, ASB Bank, Colonial First State, Sovereign Limited, Commonwealth Securities and CommInsure
Website www.commbank.com.au
The State Savings Bank building in Martin Place, Sydney, built in 1928 and used until 2012 by the Commonwealth Bank of Australia
Commonwealth Bank of Australia savings passbook, issued 1977

The Commonwealth Bank of Australia is an Australian multinational bank with businesses across New Zealand, Fiji, Asia, USA and the United Kingdom. Commonly referred to as the Commonwealth Bank (or Commbank),[3] it provides a variety of financial services including retail, business and institutional banking, funds management, superannuation, insurance, investment and broking services. The Commonwealth Bank is now the second largest Australian listed company on the Australian Securities Exchange as of January 2008 with brands including Bankwest, Colonial First State Investments Limited, ASB Bank (New Zealand), Commonwealth Securities Limited (CommSec) and Commonwealth Insurance Limited (CommInsure).

Founded in 1911 by the Australian government, the Commonwealth Bank is one of the "big four" Australian banks, with National Australia Bank (NAB), ANZ and Westpac. The bank listed on the Australian Stock Exchange in 1991 and the government fully privatised it in 1996.

History[edit]

Foundation and early history (1911–1941)[edit]

The Commonwealth Bank of Australia was founded by the Commonwealth Bank Act on 22 December 1911, introduced by the Andrew Fisher Labor Government, which favoured bank nationalisation. In a rare move for the time, the bank was to have both savings and general bank business. The bank was also the first bank in Australia to receive a Federal Government guarantee. The bank's earliest and most strenuous proponent was the flamboyant American-Australian Labor politician, King O'Malley, and its first Governor was Sir Denison Miller.

The bank opened its first branch in Melbourne on 15 July 1912.[4] In an agreement with Australia Post that exists to this day, the bank also traded through post office agencies. In 1912, it merged with the state savings bank in Tasmania, and by 1913 it had branches in all six states.

In 1916, the bank moved its head office to Sydney. It also followed the Australian army into New Guinea, where it opened a branch in Rabaul and agencies elsewhere.

In 1920, the bank took over from the Department of the Treasury the responsibility for the issue of Australian bank notes, the beginning of its acquisition of central bank powers.[5]

In 1920, the Commonwealth Bank merged with the state savings bank in Queensland.

In 1931, the government transferred to the bank the savings bank business of the Government Savings Bank of New South Wales (est. 1871), and the current account and fixed deposit business of the Rural Bank Department. The bank also acquired the State Savings Bank of Western Australia (est. 1863).

Central Bank (1920–1960)[edit]

The bank's role in central banking expanded gradually after 1920. In 1931, the bank board came into conflict with the Labor government of James Scullin. The bank's chairman Robert Gibson refused to expand credit in response to the Great Depression (as had been proposed by Treasurer Edward Theodore) unless the government cut pensions, which Scullin refused to do. Conflict surrounding this issue led to the fall of the government, and to demands from Labor for reform of the bank and more direct government control over monetary policy.

In 1942, the Commonwealth Banking Corporation (CBC) suspended its operations in Papua New Guinea as the Japanese Army captured many of the towns in which it operated, and bombed Port Moresby. The bank resumed operations later, possibly in 1944.

The bank had many branches across Papua New Guinea including Port Moresby, Boroko, Rabaul, Lae, Wau, Bulolo, Goroka, Kavieng, Madang, Mount Hagen, Kundiawa, Popondetta and Wewak. On Bougainville there was Kieta, Panguna, Arawa and early on a part-time sub branch at Loloho. The bank maintained those facilities to support trade, local business, government and small savers.

The Commonwealth Bank received almost all central bank powers in emergency legislation passed during World War II and at the end of the war it used this power to begin a dramatic expansion of the economy. This was also the aim of the government at the time, which attempted to compel the Australian states to conduct their banking with the Commonwealth under the Banking Act 1945 (Cth), but the High Court in Melbourne Corporation v Commonwealth (1947) 74 CLR 31, blocked this move. The government also colossally expanded immigration programmes. To respond to this, the bank established a Migrant Information Service (later known as the Australian Financial & Migrant Information Service, or AFMIS). The bank expanded during this period. In just five years it opened hundreds of branches throughout Australia and in 1951 it established a branch in the Solomon Islands.

In 1958 and 1959, there was a controversy concerning the dual function of the bank as the central bank on the one hand and a commercial bank on the other. As a result of this, the government split the bank, giving the central bank function to the Reserve Bank of Australia, with the Commonwealth Banking Corporation (CBC) retaining its commercial banking functions. These commercial functions were exercised by the CBCs constituent banks, the Commonwealth Trading Bank of Australia (CTB), the Commonwealth Savings Bank of Australia (CSB) and the newly formed Commonwealth Development Bank (CDB).

From 1958 to 1976 the Commonwealth Bank operated savings bank agencies in the New Hebrides.

Diversification (1960–1983)[edit]

A new Commonwealth Development Bank was established in 1960 and during the 1970s the bank diversified its business into areas like insurance and travel. It established a finance company, CBFC in 1974. The bank also became more heavily involved in foreign currency trading and international banking in general.

The bank actively supported the introduction of decimal currency in the years leading up to 1966 and, like most banks, it gradually converted its paper records onto a new computer-based system. The bank created the first credit card in Australia in 1974 when it established Bankcard. In later years the bank began offering MasterCards (1984) and Visa (1993) cards as well.

In 1974, as Papua New Guinea approached independence, the bank formally handed over its PNG operations to the newly created and government-owned Papua New Guinea Banking Corporation (PNGBC). The bank retained a restricted branch in Port Moresby that it finally closed in 1982.

In 1981 the bank transferred its operations in the Solomon Islands to the National Bank of Solomon Islands, which operated as a joint venture (51-49, Commonwealth and Government of the Solomon Islands).

Deregulation (1983–1991)[edit]

1980s logo

In 1989 the bank acquired 75% of ASB Bank in New Zealand.

In 1991 the bank acquired the failing Victorian Government-owned State Bank of Victoria (est. 1842).

Privatisation and the Colonial merger (1990–2000)[edit]

Between 1991 and 1996 the Australian government fully privatised the Commonwealth Bank. The first share offer in 1991 was valued at $1,292 million, the second in 1993 for $1,700 million and the third was sold for $5,000 million in 1996.[6] It is a public company, but one of the few such companies in Australia whose official name does not end in 'Limited'.

In 1994 Commonwealth sold its shares in National Bank of Solomon Islands to Bank of Hawaii.

In 1994, Commonwealth took a 50% share in PT Bank International Indonesia.

On 10 March 2000, the Commonwealth Bank and Colonial Limited announced their intention to merge, with seven Commonwealth Bank shares being offered for twenty Colonial Shares. The merger received final approval from the Supreme Court of Victoria on 31 May 2000 and was completed on 13 June 2000. This brought into the fold Colonial’s stake in Colonial National Bank, the former National Bank of Fiji. The bank also acquired the remaining 25% of ASB Bank.

Banking opportunities in Asia saw the Bank in 2000 acquire full ownership of PT Bank International Indonesia and rename it (PT Bank Commonwealth). This bank now has over 16 branches and has opened several FX shops to cater to Commonwealth Bank clients who are tourists in Bali.

The bank today (2001–present)[edit]

In 2005, the bank established strategic co-operation agreements with two Chinese banks, Jinan City Commercial Bank and Hangzhou City Commercial Bank; it took an 11% stake in Jinan City, and a 19.9% stake in Hangzhuo. Commonwealth also established a representative office in Bangalore, India.

On 27 January 2006, the bank acquired the remaining 49% stake in Colonial National Bank (Fiji)

At the beginning of 2008, Commonwealth Bank opened a branch in Ho Chi Minh City (Saigon). Then in October, Commonwealth announced that it had purchased Bankwest and St Andrew's Insurances from their parent company HBOS plc for A$2.1 billion.[7][8] The acquisition is scheduled to be completed in early 2009, subject to regulatory approval. Lastly, on 24 December, Commonwealth announced that it had, in joint partnership with Aussie Home Loans, purchased Wizard Home Loans.[9] As part of the deal, the Commonwealth Bank will acquire Wizard mortgages up to the value of A$4 billion. The Commonwealth Bank currently owns a 33% stake in Aussie.[10] Commonwealth Bank held about 30 percent of the loan business of financial advisory company Storm Financial when it collapsed in January 2009.[11]

In December 2009, Commonwealth sold Colonial National Bank to Bank of South Pacific.

The bank transferred their ATM service desk from HP Enterprise Services in Adelaide to ITS (Armaguard) in Sydney from March 2012. The bank will change from NCR and Diebold ATMs to Wincor Nixdorf ATMs over the coming years.

The bank is the only financial services organisation to appear in the Dream Employers' top 20 list of preferred employers for 2010 and 2011.[12]

Controversies[edit]

In December 2011, a former Bankwest commercial client Geoff Shannon started an action group and website called "Unhappy Banking",[13] after losing "all of [his] company and personal assets due to the predatory conduct of Bankwest".[14] The group claims that Bankwest "moved aggressively to reduce its exposure to small- and medium-sized commercial property clients" after being taken over by the Commonwealth Bank in 2008.[15] After lobbying by Unhappy Banking,[16] a Senate Inquiry was announced into banking practices on 14 March 2012.[17]

In October 2008 former CBA financial planner Jeff Morris alleged to the Australian corporate watchdog (ASIC) and subsequently a Senate Inquiry, the extent of the misconduct of CBA's financial planning arm, Commonwealth Financial Planning Limited (CFPL), but it was not until 16 months later that ASIC would launch an investigation.[18] "There was forgery and dishonest concealment of material facts," the Senate Inquiry found in its report.[19] They concluded a Royal Commission or Judicial Inquiry as it was deemed ASIC lacked the investigative powers required to uncover the full extent of the allegations.[20] A week following the Senate Inquiry, CEO Ian Narev publicly apologised while announcing a compensation scheme.[21] Former CEO Ralph Norris also conceded that he was aware of problems within CFPL acknowledging the presence of rogue financial planners but rejected the assertion of a conspiracy to cover it up.[22]

Bank structure[edit]

Retail Banking Services[edit]

This division delivers financial services to personal and small business customers.

Premium Business Services[edit]

Premium Business Services was formally split into two departments in 2009, Institutional Banking & Markets (IB&M) and Business & Private Banking (B&PB). IB&M includes areas of the bank that provides services to Institutional Clients and Global Markets. B&PB includes areas of the bank that provides services to Business customers and private banking customers.

Wealth Management[edit]

Wealth Management brings together the Groups funds management platform, master funds, superannuation, insurance and financial advice business support. Colonial First State, Colonial First State Global Asset Management and CommInsure all form part of Wealth Management.

CBA has been granted a MySuper authority, enabling it to continue to receive default superannuation contribution from 1 Jan 2014.

International operations[edit]

The Commonwealth Bank's international presence includes:

Products and services[edit]

The Commonwealth Bank is Australia's largest retail bank and offers customers a range of products and services, including loans, credit cards, transaction and savings accounts. It has the largest branch and ATM network.[citation needed] It also offers services to people planning to move to Australia.[citation needed]

Subsidiaries[edit]

Australia

New Zealand

Asia Pacific

See also[edit]

References[edit]

Notes

  1. ^ a b c d "Commonwealth Bank of Australia Annual Report 2013" (PDF). Retrieved 2013-11-06. 
  2. ^ "Commonwealth Bank of Australia Annual Report 2010" (PDF). Retrieved 2012-07-14. 
  3. ^ commbank.com.au
  4. ^ Australia Through Time. Random House Australia. 2004. p. 191. ISBN 0 75931 002 5. 
  5. ^ "Commonwealth Bank – History – A brief history of the Commonwealth Bank". About.commbank.com.au. Retrieved 2012-07-14. 
  6. ^ http://unpan1.un.org/intradoc/groups/public/documents/eropa/unpan001420.pdf
  7. ^ Commonwealth Bank of Australia (2008). "Commonwealth Bank of Australia to acquire Bank West and St Andrew's". Retrieved 2008-10-09. 
  8. ^ Bank of Western Australia Limited (2008). "BankWest and St Andrew's sold to Commonwealth Bank". Retrieved 2008-10-09. 
  9. ^ Aussie Home Loans and Commonwealth Bank to buy Wizard Home Loans[dead link]
  10. ^ CBA to buy 33% Aussie Home Loans stake[dead link]
  11. ^ Osborne, Paul (10 August 2009). "Storm Financial collapse plan outlined". The Age (Melbourne). Retrieved 15 January 2010. 
  12. ^ "The Dream Employers". Dream Employers. 2011. Retrieved 2013-02-16. 
  13. ^ "Unhappy Banking web site". Unhappybanking.net.au. Retrieved 2012-07-14. 
  14. ^ "Geoff Shannon's Story". Unhappy Banking. Retrieved 21 March 2012. 
  15. ^ "Bankwest inquiry may start within days, senator says". The Sydney Morning Herald. 12 March 2012. Retrieved 21 March 2012. 
  16. ^ "Unhappy Bankwest clients push senate inquiry". WA Today. 6 February 2012. Retrieved 21 March 2012. 
  17. ^ "Inquiry into the post-GFC banking sector". Parliament of Australia website. Retrieved 21 March 2012. 
  18. ^ "The man who blew the whistle on CBA". Australian Financial Review. 28 June 2014. Retrieved 15 July 2014. 
  19. ^ Performance of the Australian Securities and Investments Commission. Parliament of Australia. 26 June 2014. Retrieved 15 July 2014. 
  20. ^ "Senators demand inquiry into CBA". The Sydney Morning Herald. 27 June 2014. Retrieved 15 July 2014. 
  21. ^ "CBA sorry 'too little, too late'". The Sydney Morning Herald. 4 July 2014. Retrieved 15 July 2014. 
  22. ^ "Former CBA boss Norris blames scandal on 'rogues'". The Sydney Morning Herald. 14 July 2014. Retrieved 15 July 2014. 

Further reading

External links[edit]