RCD.0001.0047.0002 ) Greater Bank Greater Bank Limited ABN 88 087 651 956 AFSL and ACL 237476 Early submission addressing questions from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry 16 February 2018 Greater Bank Limited 103 Tudor Street, Hamilton NSW 2303 PO Box 173, Hamilton NSW2303 t: 1300 651 400 I f: 02 4921 91121DX7863 Newcastle I www.greater.com.au RCD.0001.0047.0003 Greater Bank Limited Part A Introduction 4 1 Request 4 2 Review Period 4 3 Responses 4 4 Contact details 4 5 Glossary 4 Part B Response to Royal Commission Questions 5 Question 1 5 Question 2 7 Question 3(a) 8 Question 3(b) 8 Question 3(c) 8 Question 3(d) 8 Question 3(e)(i) 9 Question 3(e)(ii) 10 Question 4 12 Question 4(a) 13 Question 4(b) 13 Question 4(c) 14 Part C About Greater Bank 16 1 Our history 16 2 Proudly customer owned 16 3 Our culture and values 18 4 Our business 20 4.1 Overview 20 4.2 Products and services 20 4.3 No Personal Financial Product Advice 20 4.4 Low risk Financial Products 21 4.5 Distribution channels 21 4.6 No mortgage brokers or aggregators 21 4.7 No Authorised Representatives or Credit Representatives 21 4.8 Alliance partners 21 4.9 Our credit policy 22 Page 2 of 41 RCD.0001.0047.0004 Greater Bank Limited 5 Subsidiaries 22 5.1 Greater Charitable Foundation Pty Ltd 22 5.2 Greater Investment Services Pty Ltd 22 5.3 Greater Property Holdings Number 1 Pty Ltd 23 6 Our complaints handling and disputes resolution history 23 Schedule 1 Question 1 25 Schedule 2 Question 2 35 Schedule 3 Glossary 39 Schedule 4 Associated Entities 41 Page 3 of 41 RCD.0001.0047.0005 Greater Bank Limited By letter dated 8 January 2018 from Mr Simon Daley, Solicitor Assisting the Royal Commission, Greater Bank was invited to make an early written submission to the Royal Commission addressing a number of questions that were attached to Mr Daley's letter (Royal Commission Questions). Greater Bank welcomes the opportunity to provide this early submission. The Royal Commission Questions relate to the period from 1 January 2008 to the date of this submission ( 16 February 2018). We refer to this period below as the "Review Period". Greater Bank has provided responses to the Royal Commission Questions in Part B of this submission. To provide some context to the responses in Part B, we have set out in Part C general background information about Greater Bank, including information about Greater Bank's mutual ownership structure, business, culture and values. We have also provided an overview of Greater Bank's complaints and internal and external dispute resolution history over the Review Period. As requested, the responses by Greater Bank are provided for itself and also for 1 its Associated Entities . Greater Bank has made substantial changes to its systems, policies, processes and procedures over the Review Period. Unless otherwise indicated, any descriptions of Greater Bank's systems, policies, processes or procedures in this submission are of the systems, policies, processes and procedures in place as at the date of this submission (16 February 2018). Likewise, unless otherwise indicated, descriptions of Greater Bank's business, including its products and services, are as at the date of this submission (16 February 2018). The officers of Greater Bank from whom further information may be obtained in relation to this submission are: Scott Morgan Gregory Nyman Chief Executive Officer Head of Legal and Company Secretary Greater Bank Limited Greater Bank Limited a: 103 Tudor Street, Hamilton NSW 2303 a: 103 Tudor Street, Hamilton NSW 2303 p: p: e: e: Some of the terms used in this submission are explained in the Glossary in Schedule 3. 1 Greater Bank's "Associated Entities" during the Review Period are listed in Schedule 4. Page 4 of 41 RCD.0001.0047.0006 Greater Bank Limited Excluding cases of theft from the entity itself, or from an associated entity, has the entity identified any misconduct by the entity (including by its directors, officers or employees, or by anyone otherwise acting on its behalf) which occurred at any time since 1 January 2008? If so, what is the nature, extent and effect of that misconduct? Response We have not identified any systemic misconduct, or other systemic conduct or behaviour that we consider to have fallen below community standards and expectations. In particular, we have not identified any instances of poor conduct or behaviour that resulted in financial loss or detriment to large numbers/ groups of customers. We have included more detail than you may have been expecting in Part C to explain why this is the case. The reasons relate generally to our structure and business objectives; our culture and values; and our straight forward business model. As noted in Part C: 1. As a customer owned mutual bank, we exist solely to serve and meet the needs of our customers, and do not have the conflicting priority of seeking to maximise returns for a separate group of shareholders. 2. Our customer owned status and mutual values underpin a strong customer-centric culture. Our culture in turn underpins our attitudes and how we conduct ourselves. Customer satisfaction is genuinely the key driver of our business. If a customer is not satisfied, we do everything we reasonably can to rectify the situation as quickly as possible. 3. We offer straight forward retail banking products in a straight forward way. We believe our straight forward approach to retail banking differentiates us from many of our competitors. Keeping things straight forward and uncomplicated for our customers, and focusing on customer service, is at the core of our strategy. We believe it gives us a competitive advantage. 4. We do not provide financial planning, wealth or investment advisory services or other Personal Financial Product Advice of any kind. We do not therefore face many of the advice-related problems that have been the focus of regulators, the media and others over recent years2. 5. Our scale, structure and straight forward business model means that, although we are large enough to meet the retail banking needs of our customers, it is easier for us to monitor and supervise our employees than it may be for larger, more complicated organisations. 6. Our credit policy is conservative. Greater Bank has historically taken, and continues to take, a conservative approach to lending standards (even 2 For example, refer to ASIC Report 474: Culture, conduct and conflicts of interest in vertically integrated businesses in the funds-management industry; ASIC Report 499: Financial advice: Fees for no service; ASIC Report 515: Financial advice: Review of how large institutions oversee their advisers; ASIC Report 516: Review of mortgage broker remuneration; and ASIC Report 562: Financial advice: Vertically integrated institutions and conflicts of interest. Page 5 of 41 RCD.0001.0047.0007 Greater Bank Limited relative to our mutual peers) to ensure customers are well placed to meet their repayment obligations and achieve their objectives. We also genuinely work with customers who, for whatever reason, have difficulty meeting their obligations to help them get back on track. This approach is reflected in our loss history, which is well below industry averages. 7. We do not use mortgage brokers or aggregators or have Authorised Representatives or Credit Representatives, and, as we do not provide Personal Financial Product Advice, we do not face many of the inherent conflicts of interest that exist in larger, vertically integrated organisations. 3 The rationale for this is our desire to have direct relationships with our customers so that we can ensure customer satisfaction. As noted, we genuinely focus on customer experience and outcomes. That is not to say though that we are immune from "conduct risk" 4. We are not. We identified instances over the Review Period where, in the circumstances, we could have done things better or differently that would have resulted in improved customer experiences or outcomes. We have provided descriptions in Schedule 1 that are indicative of the nature, extent and effect of the matters we identified. We appreciate the types of matters we have identified may not be material to the Royal Commission, as they are isolated and sporadic incidents mostly involving human error or mistakes that impacted one or only a small number of customers. Most had no impact on customers or resulted only in inconvenience. Very few resulted in financial loss. Importantly, it is central to our business ethos that where a customer suffers loss as a result of an error or mistake we make, restitution is offered and the customer is fully compensated. We are accountable to our customers as the owners of the business, and so it only serves us well to be honest, transparent and fair when dealing with our customers, including when things go wrong. 3 Refer, for example, to ASIC Report 562: Financial advice: Vertically integrated institutions and conflicts of interest. 4 ASIC describes "conduct risk" as "the risk of inappropriate, unethical or unlawful behaviour on the part of an organisation's management or employees" (ASIC Report 474: Culture, conduct and conflicts of interest in vertically integrated businesses in the funds-management industry, p 8), and has noted such "conduct can be caused by deliberate actions or may be inadvertent, because of inadequacies in an organisation's practices, frameworks or education programs" (Speech by Greg Medcraft, ASIC Chairman, The human factor: Is conduct risk on your radar? 25 July 2017, p 2). Page 6 of 41 RCD.0001.0047.0008 Greater Bank Limited Has the entity identified any conduct, practice, behaviour or business activity it has engaged in (including by its directors, officers or employees, or by anyone otherwise acting on its behalf) since 1 January 2008, which it considers has fallen below community standards and expectations? If so, what is the nature, extent and effect of that conduct, practice, behaviour or activity? Response The term "community standards and expectations" is not defined in the Terms of Reference.