NAB's inability to fully remedy illegal conduct in the foreign exchange market was laid bare in Friday's hearing of the royal commission into misconduct in banking.
In December 2016 ASIC entered into enforceable undertakings with both the National Australia Bank and Commonwealth Bank of Australia "in relation to the banks' wholesale spot foreign exchange (FX) businesses".
The regulator said that, as a result of its investigation, it was "concerned that between 1 January 2008 and 30 June 2013, both banks failed to ensure that their systems and controls were adequate to address risks relating to instances of inappropriate conduct identified by ASIC."
Insider dealing and front running are the essence of the concerns over inappropriate conduct at CBA and NAB.
Counsel-assisting Rowena Orr told the royal commission on Friday that an independent expert reported recently that "progress in developing the program has been slow. The program appears to have evolved iteratively during 2017 rather than through a well-designed process.
"There appears to have been no comprehensive risk assessment across NAB's spot foreign exchange business against the enforceable undertaking requirements and relevant regulatory standards and guidance. Some key stakeholders have had limited engagement in the program to date.
"NAB's independent risk and assurance functions have had limited involvement and the human resources function has also had limited engagement. In combination, these have led to gaps in the program and a lack of detail in the action plans."
Orr read out more of this travesty, sourced to the consultants, Promontory.
"We see here the assessment of NAB's FX program design.
"We are unable to assess the overall effectiveness of the program or of any program work streams to prevent, detect and respond to the enforceable undertaking conduct types. We found action planning has progressed but not completed in any of the assessment areas.
"Little progress has been made in the detailed design of the action plans."
It goes on and on, a marker of a bank today confronting statutory management and a sentence of nationalisation. Or is NAB already wholly Treasury owned, is that the scenario?
It's unrelenting.
"The action plans are relatively high level and lack sufficient detail to enable us to evaluate the effectiveness of their design to address the concerns raised in the enforceable undertaking," Promontory said.
Orr: "Now, Mr Shipton, these are troubling findings from the independent expert tasked with assessing the effectiveness of the program that the enforceable undertaking required NAB to develop."
Shipton: "They are, indeed, very troubling.
"The enforceable undertaking required the development of a plan. And the plan was clearly deficient."
NAB provided its program for assessment by the independent expert in November 2017.
At the end of March 2018, "Promontory provided its independent expert report on
phase 1 of the program that NAB had developed pursuant to its undertaking under 30 the enforceable undertaking," Orr said.
"Mr Shipton, what is the point of having a deliverable like this if NAB could produce a program that was so deficient that it was incapable of being assessed by your independent expert?" she asked.
Shipton, ASIC's inexperienced and uncomfortable chair, found refuge in this: "The documentation should have gone further to make it very clear … as to the sufficiency and the quality of the deliverable," he said.