Australia has a banking problem.

That’s the inescapable conclusion to be drawn from the Commonwealth Bank’s massive financial planning scandal – a scandal that the bank has steadfastly refused to address, until public pressure forced it to today.

This morning, CBA boss Ian Narev held a media conference in which he finally apologised for the bank’s excesses and pledged to review a decade’s worth of financial advice (the review, however, will not be independently run). Given that the bank has already paid out $51 million in compensation to more than 1,100 customers, it could be on the hook for hundreds of millions more.

So what’s this all about?

One of Australia’s largest and most profitable corporations has been swindling its customers.

Many have lost their life savings.

In May, the ABC’s Four Corners aired an episode that chronicled the damage to just one of those customers: Noel Stevens, a terminally ill cancer patient who had his life insurance claim with the Commonwealth Bank rejected.

Stevens had moved his life insurance to the Commonwealth from Westpac, after answering a cold call from a Commonwealth bank teller and going in to his branch to see a Commonwealth financial planner.

Both the teller and the planner received a commission for selling Stevens the life insurance policy. But when Stevens got cancer and tried to claim, the CBA’s CommInsure rejected him. It scrutinised his medical records and claimed he had deceived the bank about his medical history.

A court later found that the Commonwealth Bank was “negligent” and demonstrated “misleading and deceptive conduct” in selling Stevens that policy.

As CBA whistleblower Jeff Morris told Four Corners, the CBA has a “sales culture” in which staff are encouraged to grab as much of their customers’ wallets as they can.

The CBA’s most notorious villain was a Sydney financial planner named Don Nguyen. For several years in the 2000s, Nguyen was one of the CBA’s top-selling financial planners. In 2007 alone, he signed up $39 million worth of custom. His salary that year was reportedly close to half a million dollars.

But Nguyen was a rogue planner. According to Morris, Nguyen was widely known inside the bank as “Dodgy Don.” As well as pushing all his clients into highly risky financial products which they clearly didn’t understand, Nguyen was lying to his clients, doctoring their case files, and even forging their signatures.

As Morris told the Senate inquiry into the scandal, Nguyen had been caught paying $50 “backhanders” to the CBA’s Chatswood Branch staff to give him client details directly. He had also apparently been caught by a CBA compliance manager defrauding CommInsure “by tendering $5,000 invoices for financial advice that was never provided”.

Jeff Morris’ submission to the Senate inquiry is well worth a read. It’s a chilling glimpse of the culture inside the Commonwealth Financial Planning division of the CBA. Not only was there a sales culture ruthlessly dedicated to fleecing customers of their life savings, but there was also a massive cover up.

By the time that the bank discovered Nguyen, he was already out of control – a rogue employee who was wreaking havoc in the heart of the bank’s financial planning division.

Instead of firing him and going to the police, the Commonwealth Bank promoted him. A second financial planner was appointed to work through Nguyen’s customers one-by-one, in order to cover up his wrongdoing and “sanitise” the files.

As the Senate report concludes, if Morris’ account is accurate – and the CBA has made no attempt to deny the central claim that it promoted Nguyen after learning of his actions – then it “would indicate a coordinated and systematic effort by CFPL/the CBA to mislead Mr Nguyen's clients and discourage them from pursuing compensation claims”.

Nguyen continued to see clients well in 2009. He even missed the bank’s 2008 Christmas party, busy attempting to sign up a $1.6 million portfolio from a 93-year old, for a $32,000 flat fee.

The CBA continued to try and cover up the extent of Nguyen’s actions all the way through the Senate inquiry. The report finds that the CBA’s testimony to the Inquiry “deliberately and grossly understate[d]the extent of the wrongdoing within Commonwealth Financial Planning”.

Of course, only a cynic would expect a giant bank to come clean about massive fraud and malfeasance of its own accord. If the events of the past decade in the global banking industry have proved anything, it is that 'light touch' regulation of the financial sector is utterly incapable of preventing fraud and mismanagement.

There is a regulator that is charged with supervising and enforcing the provisions of bank regulations and laws. Unfortunately, that regulator is arguably the worst in Australia: the Australian Securities and Investments Commission, or ASIC.

ASIC received a tip-off about Nguyen and the rogue actions inside the financial planning division in 2008. It did nothing. Eventually, Morris and some other whistleblowers went to the media. It was the dogged reporting of the actions of Nguyen by Fairfax’s Adele Ferguson in particular that finally forced ASIC’s hand. In the end, it was 16 months before the regulator took action.

We’ve covered the dismal failures of ASIC here at New Matilda before. The regulator is a serial offender, chronically incapable of policing its own beat.

Perhaps the worst recent example was the Trio Capital scandal, in which a gang of thieves led by Shawn Richard siphoned off $176 million from the superannuation accounts of mum and dad investors. Most of the money was transferred into bank accounts in the British Virgin Islands, where it disappeared forever.

While Richard went to jail, the alleged mastermind, Jack Flader, was not pursued by ASIC, despite ASIC’s own evidence that he was the “ultimate controller” of the fraud.

The Senate Committee was scathing in its view of ASIC’S conduct in the CBA affair. It notes that ASIC simply took the bank’s word on many matters, refusing to properly investigate. Terrifyingly, ASIC told the Senate Inquiry that it was happy with the CBA’s compensation process, testifying that it was “fair and robust”.

That view is now untenable, given that the CBA itself has re-opened compensation.

The Report concludes that “ASIC has shown that it is reluctant to actively pursue misconduct within [the CBA]; rather, it appears to accept the information and assurances the CBA provides without question. The committee is also strongly of the view that the CBA's credibility in the CFPL matter is so compromised that it should not be directly involved in future arrangements for investigating the misconduct or reviewing the compensation process.”

Do we need a Royal Commission into the Commonwealth Financial Planning scandal, and ASIC’s handling of it? You bet we do.

ASIC has been asleep at the wheel for far too long. Even the CBA appears to be admitting that it misled the regulator, and that ASIC wasn’t even aware it was being misled.

But that’s not the view of Finance Minister Mathias Cormann.

Despite his government’s pursuit of 20-year-old allegations about the involvement of AWU officials in the house renovations of Julia Gillard, he thinks a Royal Commission into the CBA is unnecessary.

To add insult to injury, he is pushing ahead with the government’s plans to wreck Labor’s Future of Financial Advice (FOFA) reforms.

One of the critical planks of the FOFA reforms was aimed at outlawing financial planners from receiving commissions for selling products to their clients – exactly the loophole that “Dodgy Don” Nguyen exploited.

As for the Commonwealth Bank, well, its boss Ian Narev told customers today that “I unreservedly apologise to all customers affected.”

Thanks Ian. Perhaps he should also have apologised to the Senate, which concludes that his bank continued to obfuscate and cover up in its testimony to the recent Inquiry.

Narev’s sorrow shouldn’t worry the bank’s shareholders or executives overly. The CBA is rolling in cash. The bank made a whopping $4.2 billion profit for the second half of last year.

And what about ASIC? It has openly acknowledged it doesn’t have the resources to carry out its regulatory responsibilities.

After $120 million in funding was cut in Joe Hockey’s budget, the agency has announced it will scale back its surveillance activities.

It’s a good time to be a corporate criminal in Australia.