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UPDATE 1-Australia's Commonwealth Bank expects to pay "significant" customer compensation
October 18, 2016 / 4:56 AM / in 9 months

UPDATE 1-Australia's Commonwealth Bank expects to pay "significant" customer compensation

3 Min Read

* CBA CEO says bank "let customers down" in scandals

* No set budget for customer compensation - CEO

* Bank says payments won't materially affect earnings (Adds CEO quotes, industry details)

By Jamie Freed

SYDNEY, Oct 18 (Reuters) - Commonwealth Bank of Australia's (CBA) Chief Executive Ian Narev said Australia's biggest lender would make significant compensation payments after it "let customers down" in a series of scandals over financial advice and insurance payouts.

Narev said on Tuesday CBA would make more "remediation" payments to customers in coming months, declining to specify whether they could run into tens of millions, or hundreds of millions of dollars. The scandals involved poor advice to financial planning clients as well as delaying and denying life insurance claims to terminally ill customers.

"Some of those amounts that you will hear about will be significant amounts," said Narev, speaking at a business lunch. "That is to be expected given that we are big businesses going back in many cases over more than a decade and erring on the side of paying if we think there was a problem."

Narev and the other bosses of Australia's four largest banks were forced to testify before a parliamentary committee in October amid widespread public dissatisfaction with the banks that control 80 per cent of the nation's lending market.

A CBA spokeswoman said later on Tuesday the compensation payments would not have a material impact on the bank's earnings. In August CBA reported a record cash profit of A$9.45 billion ($7.17 billion) for the fiscal year ended June 30.

In September, Westpac said it had returned A$20 million to over 800,000 customers, while Australia and New Zealand Banking Group Ltd pledged A$28 million to around 400,000 customers. Each of the two banks had reported problems with marketing material to the corporate regulator.

Narev said on Tuesday that in making what he termed "remediation" payments, CBA would not be bound by a particular budget.

"Obviously as part of the normal part and parcel of what we do, we make estimates and provisions based on our experience," he said. "The number one focus that we will have is on making things right." ($1 = 1.3187 Australian dollars) (Reporting by Jamie Freed; Editing by Michael Perry and Kenneth Maxwell)

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