Case Study Report On National Australia Bank (NAB)

Company Overview

Introduction

In the compilation of this report data, collecting and research were the two approaches used to analyze National Australia Bank (NAB). The data presented in this report is mainly collected through sources such as articles, news reports, eBooks, Australian Accounting Standard Handbook and educational websites.

 The information collected and analyzed within this report contributed to the review of measurement standards, remuneration packages, leasing, hedging and revenue within NAB. Also, the reference list of this report complies with APA referencing standards.

The report will discuss current accounting policies and governance of NAB as a financial institution under the Australian Accounting Standards and evaluate its performance regarding financial reports which contain the net profit, salary, and the hedges.

Recommendations will be provided for the company after analyzing the relevant findings and the implications of findings in this report before the conclusion which will summarize the ideas in the report and my thought on the issues that have been discussed.

However, the assumptions of this report are mainly based on the primary data from the company’s annual reports and the secondary data acquired from NAB database on the internet and media releases. According to the Australian Accounting Standard, the conclusions made in this report relate to the positive accounting theory.

National Australian Bank (NAB) is a financial institution in Australia with its headquarters in Melbourne, it was ranked the 21st largest bank in the world regarding market capitalization and 41st in the world with regards to total assets in 2014.

It is ranked among the top three banks in Australia with competitors like Australia and New Zealand Banking Group (ANZ) and Commonwealth Bank. It has over 12,400,000 customers in more than 1800 branches globally. These branches are in countries like China, Japan, New Zealand, Australia, Singapore, Indonesia, Vietnam, United Kingdom and the United States employing over 42,000 workers.

This bank was founded in the year 1982 with the name National Commercial Banking Corporation of Australia Limited.  It has been headed by Ken Henry since 2015 who was the chairman of the board of directors. It has been ranked number 100 as of May 2017 by Forbes, position 362 in sales, 121 in profit, 55 in assets and 139 in Market value.

It provides several services such as business, consumer and wholesale banking, wealth management and insurance with a total income of US$5,144 million with assets that can be amounted to US$617 million. It is headed by an executive of eleven professional consisting of eight male and three female employees. This team is led by Andrew Thorburn who is the group’s chief executive officer a qualified expert in agriculture and business, health, education community banking and the government.

Financial Performance of NAB

The National Australia Bank has a vision of being the most respected bank in Australia. For it to achieve this vision, the management has focused on three objectives: the customers as advocates, the people as engaged and the shareholders receiving active returns. To meet this, they have focused on areas such as delivery of quality and excellent customer experience, deepening relationship with the customers and reshaping the performance of their business.

National Australian Bank bounced back from loses in the previous years to record the most considerable profit of 3,294 million dollars, which could be because of its refined strategy in its market and service.

It has a board of directors who are headed by Dr. Ken Henry who ensures that the members perform their duty in accordance with board charter, the board has a responsibility of ensuring that the bank operates within the standards of corporate governance and that all management issues are dealt with accordingly.

National Australia Bank has also undergone several challenges in the past years that have led to the sacking of above 20 bankers and punishment of 32 other employees in a scandal; they have also in some scenarios been accused in court of several offenses against the statutory regulations.

This report will consider the following perspective of NAB financial performance: remuneration, hedging, measurement, investment, and leases.

Remuneration is the salary, wage or pay including allowances, benefits, bonuses, cash incentive and non-cash incentive during one’s employment

The head of the Consumer and wealth division of National Australian Bank, Andrew Hagger received a 36% increase in his pay in the year 2017. Overall the cash earnings were $6.64 billion a 2.5% increase from 2016. In 2016 NAB posted a profit of $6.48 billion which was an increase of 4.2% though its net profit dropped to $352million while in 2017 after 6000 job losses the bank realized a cash profit of $6.642 million and a net profit of $5.3 billion with net interest increasing by $238 million.

The payment of employees in NAB is based on experience, skills and work input, National Australia Bank salary is $196,899, middle salary is $185,000 with a range of salary between $124,592 and $300,000. National Australia Bank salaries are obtained from organizations and government agencies. Every salary is identified with an actual job position with the highest paid employee being the director with about $230,000, and the lowest paid is the entry level with about $57,000

Remuneration

The market value of National Australian Bank was $65 billion with sales of $24.2 billion and an asset of $595.3 billion. As of now the share price of NAB has dropped to $28.71 from $34.09 almost a year ago.

Below is half year diagrammatic representation of result for NAB cash profit from 2010 to 2017

A hedge is an investment undertaken to reduce risks encountered in price movements that affect the asset. It can also be referred to as insurance policy of assets. Hedging is therefore considered an investment strategy by use of hedge funds.

AASB 139 on Financial Instrument: Recognition and Measurement that was prepared on 2010 by the AASB was a significant accounting standard used until this year when AASB 9 was released. This new standard is critical in the accounting organization in that it addresses the classification and measurement of liabilities and assets providing a new set of rules in the financial service sector regarding classification of financial assets, dividends, and investments. NAB adopted the use of AASB in the year 2014 in October

AASB 132.11on financial instrument is an agreement that leads to the renascent of a financial asset of an entity and a financial liability or equity instrument of another entity. AASB 132.AG 15 Financial instruments entails instruments such as receivables, equity instruments, and payables. While a derivative financial instrument comprises financial options, currency swaps, forward contract and interest swaps

AASB 132.AG 16 derivatives financial instrument is creating rights and obligation with the impact of moving one or several risks as a result of finance inherent in an underlying primary financial instrument. It also gives a party a contractual right to exchange financial assets or financial liabilities with another party under conditions that are potentially either favorable or unfavorable. According to Appendix A of AASB 9 value of this derivative financial instruments changes in response to the change in a variable such as a commodity price, foreign exchange rate, financial instrument price, interest rate and other variables. According to AASB 6.5.2 hedge can be classified into; fair value hedge; cash flow hedge; a hedge of a net investment in a foreign operation

Because of increase of the net profit of NAB after a vast period, implementation of the AASB 9 has had an impact in finding a way of dealing with risk accrued from profits. NAB has done hedging for foreign exchange rates, commodity price and the interest rate with the foreign exchange being the major one.

Hedging

The National Australian Group applies typically a tri-stage approach in measurement of the expected credit losses by in following the divisions of financial assets which are measured not by using upright merit or profit and loss, this approach includes: instruments of debt which are quantified at amortized cost and fair value through the collective income, there is loan contract and financial commitment.

It is a contract outlining the terms of renting a property that is owned by another person; the lessor is granted the rights to use the property of another person where regular payments can be made in specific times of the year.

AASB 16 was issued in the year 2014 and is set to be effective in the year 2019. It is an amendment of AASB117.  The lessee with operating lease now come onto the balance sheet together with a lease liability. For lessors, the lessee classified as financial and operation will remain mostly unchanged. All leases will be presented on the balance sheet. There is the elimination of nearly all off-balance sheet accounting lease requires the capture of core data than the previous standard. There will be recognition of bad debts due to leverage. Assets can no longer be purchased at a lower price than fair value at the date. Options are needed to recognize all assets and liabilities of all the leases in 12 months apart from when the asset is of less value, assets and liabilities will be measured regarding the present market value and lastly a lessee measure the right to use leases on a new value basis.

The stator requires the standard AASB16 to be implemented in the year 2019 From the first of July which means that for the most company it impact will be expected in 2020.AASB 16 amended the areas that are covered by AASB 140 by redefining the term investment to entail property both owned by the organization and those that are held by the lessees hence bringing the difference in operating and finance leases exemption.

All leases are known in the balance sheet as the right of use and a counterpart lease liability. National Australia Bank has started to hold talks and discussion on this new standard even as they are looking forward to putting it into practice on 2019. The bank is currently accessing the potential impact of this standard about AASB 117 identifying the changes it will have on accounting policies, internal and external reporting requirements, business processes, external and internal controls, lastly its impact on the profit and losses that night accrue form the new standard.

Measurement

This new standard will change the lease agreements, and changes in the report that will occur such as the liability of a lease and right of use asset are currently discounted using the interest rate or borrowing rate however the new standard will require the recording of the difference in conversion in the reports. Leases will no longer be handled as a rental expenditure in a statement of income; they will be recognized as depreciation and interest expense on the implementation of the new regulations. lease rentals that are operational are included as operating activities in the cash flow statement however after the implementation of the new standard the principal of lease payments will be disclosed in the financing activities as interest under operating events, but the standard does not primarily touch on the lessor.

The International Accounting Standards Board (IASB) provided a common global language and standards for businesses that company accounts are comparable across the globe, this standard is known as International Financial Reporting Standards, and they are organized within a framework of the generally accepted accounting principles (GAAP).

A recent study has shown that there has been a rise in the use of non-accounting standard report in Australia since many Australian companies have not been able to follow GAAP standards. NAB has, however, been on the safe side of this behavior even as it prepares to move towards integrated reporting since it recognizes the importance of this reports to its investors however this practice is continuing and has made investors very unhappy. The reports that are generated without the correct standards are resulting to the production of statements that mislead the stakeholders, shareholder, and creditors due to its manipulation of AASB 133 on Earnings per Share and AASB 119 on surplus and defects on the report.

Revenue is the income that a business gains from its normal daily business operationist are the amount of money that is received by a company during the specific period which includes discounts and deductions for the business goods. It is calculated by multiplying amount of the goods that are sold by the number of the goods sold.

AASB 15 is a new revenue standard that was launched the same time as AASB16 and AASB9, this new revenue standard that has been effective since the beginning of this year has started to impact how the revenue is recognized by any organization. This standard has brought changes to the way organizations are undertaking their financial reporting system by replacing the existing accounting framework and then it introduces a new collective model of how revenue is recognized in comparison of industries, markets, and jurisdiction.

Leasing

A model of five steps is applied in the determination of when to accept revenue and the amount to recognize the revenue depending on the criteria that are met; this step entails identification of the contract, identifying the performance obligation, determination of the transaction price, allocation of transaction price and lastly, recognizing revenue.

AASB 15 provides guidelines on identifying a contract with a customer, recognition on performance obligation and assignment of the transaction price to a performance obligation.

The National Australian Bank implemented this standard this year as per the requirements though it has not fully reached its potential since there are a lot of factors to consider before rolling it entirely as its implications and outcomes are closely monitored.

National Australian Bank total share returns were measured amongst the top banks in the country, and it emerged among the top three with a net profit of 5.29 a 4.39 increase from 2016.

Remuneration can be divided into three; this are: fixed remuneration, short-term incentives (STI) and long-term incentives (LTI) which make up the total remuneration’s fixed compensation of senior management in the organization did not change while the STI and LTI have been changing within the years

For NAB the Fixed Remuneration (FR) there wasn’t any change, in STI there was a reduction of the STI highest advantage from 175% to 150% of FR from 2018 due to continuing allocation on a fair value methodology. In Long term initiative value assignment by use of a 5-day weighted average shared price for LTI based on a maximum grant value of 130% of FR there was change.

NAB acknowledged that its incentive structures and targets contributed to a few people choosing to behave unethically hence according to NAB regulations they some were sacked while others resigned, there was a need for change in the way it carried enumeration of staff and its incentive plans and scheme. By October 2016, NAB had implemented changes to its Star Sales Incentive Program for bankers selling mortgages.170 A “decelerator” had been introduced which “quite substantially” reduced the total amounts that could be paid to a banker under the target-based reward system, once the banker reached particular levels of revenue.171 NAB also made changes to its scorecard system to reduce the percentage on the scorecard relating to sales (particularly for leaders).172 The changes to the scorecards are aimed at achieving a better balance between sales targets and customer-service targets, too (among other things) reduce the incentive for employees to engage in misconduct.

Recommendations

In the key management personnel which includes the non-executive directors and senior executives, MS Ann Sherry was appointed as a member of the remuneration committee.

The remuneration policy has enabled the company to support the bank’s strong culture and vision that encourages the right behavior of customers, shareholders and business outcomes. The remuneration policy has allowed the attainment of the vision in that it has attracted and retained high performances in the company. Therefore, it has encouraged the drive to perform which promotes poor customer outcome; it has aligned the interests of the senior executive and the shareholders through ownership of NAB security, it has also helped in complying with jurisdictional remuneration regulation and group delivery, inclusion and paying of equity commitments.

Remuneration has encouraged the performance of the board in their attempt to maximize their reward in their planning and their decisions in the organization.

National Australian Bank TSR performance is ranked top hundred in the Global Listed accountancy organizations in the ASX100 companies.

NAB has changed its group incentive plan principles with the aim of improving the culture of NAB, better protection of the customers and consistency with the Australian Bankers’ Association Retail Banking Remuneration (ABARBR).

NAB continues in leading organizations to reforms and in its commitment to reviewing recommendation by 2020. The Committee watches NAB’s performance implementing the review which in 2018 include:

 The banking managers, their assistant’s consumer team leaders who migrated to an outcome customer aimed incentive plan and will not continue to be receiving at-risk remuneration tagged to sales incentive plan. On the contrary, they participate in the Group STI Plan, majorly to reduce the connection between sales and compensation.

 Scorecards for retail employees have been refined to ensure all balanced scorecard measures are customer-centric, product neutral and contain both quantitative and qualitative measures to drive improved quantity and quality of customer conversations, with no more than 33% weighted to financial measures.

The remuneration practices and the incentive plans have changed over time in different banks, and this has happened even within groups in the same institution. Therefore, the implications of putting into practice the new standards have been modified in some to a small extent in others to a large scale. For example, some banks, have started to impairment this new culture of standards which is customer based. While for others, the new changes will be significant, and changing the culture has proven challenging. Furthermore, the movement that is out of direct sales remuneration will not be attractive to staff who have selected self-roles because of the potential changing reward. Therefore, the bank may respond by increasing the fixed pay in a move to retain talented individuals with the required set of diverse skills. This will ensure the increase of requirement in providing that the management performance is instead of the goal of the organization that underpin the reforms in remuneration

Assumptions

As mentioned earlier, hedging can also be viewed as an insurance policy. NAB is faced with several problems. Therefore, any move towards dealing with this risk can be referred to as hedging since hedging entails discovery of company risks and making if initiative towards covering the risks. According to AASB 9, the goal of hedging is to represent, in financial statement, the impact of risk management of an entity activity that use the financial instrument to manage the market risk exposure could affect the profit and loss. The risks that are faced by the public accounting institution include:

Currency risk

A lot of firms in Australia have been affected by the AUD, and as a result, they have tried to find ways of dealing with currency risk, in dealing with the management of this risks business have employed hedging strategies employed by a company too.

Improved quality of assets that could result to total charge providing for bad debt (B&DDs) of $455 million. This has been seen in the performance of NAB in us, when comparing this result to September 2014 half year, this B&DD charge went up to 30.4% because of releases from the Group economic cycle adjustment and NAB UK CRE cover of $104 million in the period before that are not repeated

Even though the AUD has depreciated since 2014, a very high proportion of organizations in Australia still have a negative impact regarding the organization’s productivity. With the AUD depreciating, the organization has been going even more for hedging and import substitution instead of increasing cost-cutting. Hedging was significant for wholesaler, retailers, and manufacturers mostly in the accounting sector while the construction and the mining industry were the mostly excluded. The mining industries sought to use downsizing, while most miners found to the reduction of overheads and other strategies. Most organizations primarily in the accounting including NAB has gone for currency hedging and currency depreciation that seems to be the most excellent issue affecting Australia indicated by the rate of export hedging  

Acknowledging the significance of the hedging strategy in the management of currency risk, NAB firm in charge of the survey asks firms to produce details concerning their current hedging positions. With the increase of exporters, the proportion of FX exposures that are hedged have been reduced from the high levels as seen in the year 2011.

Large organizations have therefore increased the FX exposures which are hedged markedly in recent quarters to over 40% (2015) as compared to 27% (2014)

Conclusion

Debt

On 30th September 2008, National Australian Bank announced that it had increased hedges against its exposure to liabilities and debt products. That would lower its cash earnings by about A$ 100 milrinone has the most significant exposure to US debts among Australia’s most prominent four lenders, NAB hedged A$1.6 billion which would result in the synthetic CDOs that gave the bank protection levels which would withstand the worst default rates in case of such an occurrence.

“As a result of this work, long-dated hedges have been entered with a large, highly reputable, global bank counterparty which strengthens NAB’s position and substantially reduce the likelihood of loss arising from SCDOs,” NAB said in a statement.

Regulatory challenges

There have been challenges for NAB in meeting regulatory limit of its strategic plan. This means that it hasn’t been responding to its set standards for quite a long time. This could eventually lead to lack of investor appetite for loans in their bank; an example is that if the mortgage was at 41% a surplus of the bank’s expectation by 11 percent which means that NAB did not meet the regulatory limit.

Falling margins

If there’s one blotch in Australia bank stellar profit run over the past years, it’s been sliding net interest margins, a measure of lending profitability.

National Australia Bank has been exposed to fluctuation in rates of interest that arises from its assets and liabilities such as leases, corporate debt, and cash which are in AUD and USD currencies. Interest rate risk is how much interest they might have to pay for borrowing. National Australian Bank uses interest exchange rate, the rate of forwarding agreements and alternative for managing interest rate risk which helps them gain competitive advantage.

Revenue challenge

The net interest income fell for NAB with total revenue salvage only by the other operating income. That comes two days after ANZ and other financial in Australia also reported falling revenue.  National Australian bank has, therefore, opted for hedging to secure its assets.

Housing exposure

House loans make a higher percentage of about 58% of NAB’s total loans and advances, even though loan rates are negligible and stress testing scenario by the bank show hinges are very much under control, there is one metric which is showing some niggles. There has also been a breach of s 128(a) of the NCCP that occurs due to the conduct of some of the bankers who in some circumstances received financial information in support of loan applications knowing it to be false

Also, mortgage areas that go or an extended period results to problems in the house, hedging has therefore played a vital role in the performance of house loans that contribute to the critical profit that is raised in the institution.

Rising expenses

NAB has continuously shown that over the years that the costs have increased this causing problem consistently to flagged investment spent, depreciation and amortization will likely increase even though the company has tried reducing the labor to 711 jobs and more. 

The Australian banking system has its origin of effectiveness from finances. However, banks that recognize to the evaluation during the consultation process that such a cultural transition had occurred within their organization, normally also stated that they were now seeking to reduce the emphasis placed on sales performance relative to customer service, without undermining the bank’s financial soundness. I have been impressed by the number of senior bank staff who accept that cultural change is key to rebuilding trust in the industry and mitigating risks of poor outcomes for customers. The change they seek is to ensure that they emphasize on mora behavior and helping customers to identify an

The effects of AASB 15 might be epidemic, but this new standard of revenue like AASB 15 can also present with it several opportunities. It has been proven that the real impact of the standards whether new or old emerges only after a company has decided to commence its implementation which could take a lot of time as the company is struggling to implement the new standards fully. Some of the impact the impacts that organizations must prepare themselves for are that the:

1.    duration of recognition and the quantity of revenue known might be altered
2.    alterations may be required in controls, systems and processes

III.    large scale new declaration will be needed

1.    KPIs and ratios could receive some effects, this could greatly affect shares and the capital
2.    investors would need to be taught on the changes in taxes profile.

In looking at industries the most affected are, construction, engineering, telecommunications and software development. As it is known, any changes in accounting policies may have an impact on a company tax. Such effects include income and tax expense. This is because when analyzing the tax expense and deferred taxes the beginning starts with accounting concepts then it reconciles to tax payable, and specific tax provisions rely on accounting standards for them to apply.

NAB has implemented this standard, but they are still examining it and trying to come up with comprehensive ways of how to manage the tax charges that will accrue to maximize profits because of one-off transitional adjustments.

NAB is considering: how to identify the transaction types that may result to issues in determining an entity taxable profit, lastly, they are thinking any other decision to improve the positive impacts and reduce the adverse effects of the tax.

A lease is an agreement that shows the terms that a group or an individual agrees to rent a property which is owned by another institution or individuals. A party that breaks the lease agreement is subject to a civil lawsuit.

NAB provides leasing services in which any person or organization can approach the bank then they choose the vehicle or equipment that they need and then NAB buys it from the supplier and leases it to the interested person. The certainty of fixed entails for the length of your lease but a lease term generally between 12 and 60 months but for one to be eligible for these leases they:

•    Must have a business with a valid Australian Business Number(ABN)
•    Must have a company that is registered for goods a service tax (GST)
•    Must have the intention to use the product mostly for business

Some of the advantages of leasing to NAB are:

Provision of balanced cash flow: leasing has enabled payment to spread over many years thereby helping in the burden of key cash payment that shall assist the business in maintenance of a steady cash flow.

Quality assets: leasing of assets does not change the ownership of the lessor over the goods. Therefore, with this contract, it is possible for the business to invest in good quality assets which otherwise could have looked unaffordable or expensive

Better usage of capital: it helps in better capital investment in that the company can fund other capital as it saves money for better capital investment.

Better planning by the organization: the expenses usually remain constant over the assets life which helps in planning expenses or cash outflow during budgeting exercise

no risk obsolescence: in the technological sector leasing brings excellent returns saving the business from the risk of investing in a technology that might soon become outdated

 off-balance sheet: leasing is not regarded as a debt. Therefore, it does not appear in the company’s balance sheet because it is classified as an off-balance sheet.

According to ASIC’s guide on disclosing non-regulation financial information, the corporate watchdog states that free market riders are not permitted for Australian public companies. NAB does not tolerate nonstandard metric s in the decision making or the reflection of actual financial performance. In 2011 NAB joined Intergrade Reporting Council (IIRC) to ensure that they participated and influenced the development of global integrated reporting standards. The use of integrated reporting has helped to:

Illustrating the identity of the company regarding culture and corporate responsibility in that the company is regarded as a dangerous organization that emphasizes on the generation of authentic and up to standard reports which it uses in the presentation of its yearly reports and papers.

It has also helped to create stable value for the stakeholders by bringing together materials data on the area that the business functions, its strategy, its governance and lastly the financial aspects of a report.

It has helped the shareholders, and the stakeholders find the information they require to meaningfully assess the performance and understand the business model and strategy used in the organization.

Lastly, it has enabled better and effective reporting and efficient utilization of resources which could be the reason for its increase in its profits.

According to IASB (paragraph 5,2013b), the principles of using measurement for the company: the organization needs to choose that metrics that are disclosing faithfully, relevant financial information, efficient management, and benefits toward the existing and potential investors, lenders and other creditors. In fact, these ‘positive numbers’ misled the information for regulators, investors, and shareholders (in particularly, non-professional investors).

Conclusion and recommendation

The analysis of the effect of International public-sector accounting standards within the public-sector context has shown that the new standard has been useful in the achievement of accounting comparability and modernization of accounting services.

National Australia Bank has had a lot of challenges. Especially with regards to misconduct against statutory obligation, labor and decreasing profit all over the years. However, it has also had good moments. In fact, it had recorded an increase of $4.93 billion in the year 2017 as compared to the year 2016. The number of the employees is increasing this year after quite a hard time when some employees had to be sacked due to issues with company regulations. Moreover, it has 20% of total shareholders return being ranked number one amongst major Australian banks.

This positive change in Australia has been attributed to by the changes in leasing, remuneration, and hedging. There has been an increase in compensation of the senior management particularly for Andrew Hagger who received 36% salary pay rise. The hedging program has provided great success as the company thrived off foreign risk and when the was decrease in the labor and the hedges in 2011. The change in the leasing standard requires statutory implementation in 2019; however National Australian Bank has partially implemented the difference though it I still evaluating the relevancy and further implications of this standards after the company adopted integrated reporting. NAB is yet to achieve the statutory metrics amongst the critical group financial performance indicators.

It is possible that the changes of the new standards may be implemented at a slower rate differently per department and it is not a key to labeling the organizations performance as poor or dismal.

At NAB, the culture as proven to be fundamental in their ability in delivering for its customers and shareholders, and all people that form the community around them are essential to how they provide. The employees of NAB are passionate about their service, and they have a deep relationship with the customers, and they are encouraged by implementing the five core values every day while delivering their services. The employees are controlled by the zeal to serve individuals who will move Australia forward. Furthermore, they are passionate in achieving their vision of being the most respected bank Australia and New Zealand’s.

For the financial information, NAB always presents faithfully and relevant to the shareholders, stakeholders, and investors. NAB should employ an internal auditor, and consult advice from ASIC (as external resources) if anything is unclear following the regulation of the presenting financial information performance. The role of the internal auditor is to address and observe action plans (implementation) for the company, but generally, with the strictness on the reporting standards, it has been able to provide outstanding reports and annual reviews that provide knowledge on the opportunities and challenges in the organization’s operation area.

The statutory implementation of AASB16 requires NAB to apply the new leasing standard sufficiently to avoid any legal consequences and to provide accurate reports to investors as per the AASB requirement.

Through development process and capacity building, NAB has had the tremendous organizational capability to undertake outcome measurement and evaluation to support continual learning and decision making.

NAB has had a lot of changes in strengthening remuneration and incentive programs in the operation of its organization. This included movement from the performance-based and fixed pay increases for the customer’s service and the support staff. It has also guaranteed a pay rise of 3% per year for its employees yearly under the new 2016 NAB enterprise agreement.it has also embarked on high standards for behavioral conduct and compliance.

NAB needs to implement various changes to ensure they comply with new and current standards as they have not implemented the changes in leasing and revenue fully. The non-statutory metrics have been confusing for both regulators and stakeholders. NAB should no longer have misleading financial information for existing investors, potential investors, reporting, management, and stakeholders.

NAB should do all things to ensure that its credit facilities and financial services are engaged in efficiency and honesty. It should also have sufficiently adequate training to ensure that all bankers understood consumer-lending process compliance requirements to avoid a breach of statutory obligations under 47(1) of the NCCP of the Corporation Act.

NAB should continue working on the remuneration an incentive schemes to create ideal working conditions in avoidance of people choosing to behave unethically so that it can be able to deal with the issue of employee’s misconduct leading to sacking. Also, National Australia Bank needs to come up with a way of dealing with conflict and misconduct as it seems that their methods are adverse and may not end up solving any problems through the management has insisted that their policies cannot be altered since they are satisfactory.

With the growth in technology, NAB should now focus on mobile banking where the customers can be able to access banking services at their disposal wherever they are in, and they can also communicate with the NAB agents in case of any inquiry

NAB should also focus more on productivity and growth initiative that will assist in their growth and the growth of the community that are found around them. It should also support the economy so that factors such as a change in AUD does not happen quickly to the negative that is if AUD rises.

I also recommend that there should be another independent review that can be conducted in three years to assess the progress of the new standards and their implementations and implications in NAB further.

The implementation of the above standards is very crucial. It will contribute positively to the growth of NAB as an organization through this will come with a lot of challenges since in the organization there will be different responses to the changes even as some employees have been seen resigning unlike others who have played a vital role in the operation of the organization and implementation of the new standards.

I propose that the banks in Australia cease in the practicing of quantity centered incentives which add up beforehand and trail commissions, that there should be seasonal increases in commissions in supporting campaigns and in growth of the product sale and soft payments.

The bank should initiate working with commerce partners to place new structures in the governance and management of the Mortgage Broker channel which approximate as closely as possible the general approach to performance management and remuneration arrangements proposed in earlier recommendations relating to staff. Of course, the methods are not expected to be the same across the bank’s channels with the intention, nevertheless of Mortgage performance being examined, with a more customer focused orientation.

Within the organization, I believe that there is a need for a team that could oversee ensuring the standards are going to be reached within the organization they can supervise the implementation of this recommendations for a few number of years while reporting to the public and the organization until the standards have been fully implemented.

There should also be consistency in the generation of the reports that should not only be done yearly. However, it could be done on a quarterly basis. It should also ensure that there are sufficient and safe communication channels in place. This will make them get reply from the staff about their perspectives and the extent of effectiveness of the efforts that the banks have undertaken in changing the bank’s operation, including performance management and arrangements of remunerations and the respect of the informer arrangements.

Reference

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