ConfidentialNAB.032.001.0042

National Australia Bank LimitedABN 12 004 044 937 800 Bourke St Melbourne Telephone:Fax:

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NationalAustraliaBank

21 December, 2015

Michael Sadaat

Senior Executive Leader

Deposit Takers, Credit and Insurance

Australian Securities ands Investment Commission

Level 24, 120 Collins Street

MELBOURNE VIC 3001

Email:

Dear Michael,

National Australia Bank Limited: Notification of Banker Investigations - Western Sydney

The purpose of this letter is to provide the background and details of an investigation NAB is conducting into bankers in Western Sydney. We have also included an outline of actions in progress and would foresee the opportunity to provide an update on these in the New Year.

Background

In late October 2015 an internal fraud investigation was initiated as a result of an alert via the NAB Whistleblower program. The alert generated a review and detailed investigation of suspect transactions by bankers identified in the alert within the Greater Western Sydney Local Area Market in NSW.

Investigation findings to date

The investigations to date have identified banker fraud as well as potential control breakdowns in the NAB Introducer Program origination and application process, and income verification procedures for both personal loans and home loans. On 29th October an initial working group was convened and continues to meet bi-weekly to assess new evidence, discuss the outcomes of banker interviews and determine the application of appropriate consequence management. Consequences applied to date have included the dismissal of 5 (five) bankers and the termination of 2 (two) introducer relationships.

Next steps and further investigations planned

The investigation into this matter within the Greater Western Sydney LAM is now continuing in 2 streams:• Fraud investigation into individual bankers, correspondence with introducers and other bankers.

Interviews continue to be conducted with bankers identified for review.• On 23ld November a Working Group was established combining NAB Forensic Investigations, Risk

and Personal Banking representatives to investigative if any of the control breakdowns are systemic and any implications for customers.

• On 14th December KPMG (Forensic Services) were engaged to support this investigation at both a strategic and resource level.

••

National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686 Page 1 of 2

NAB.032.001.0043

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• NAB Internal Audit have also advised they are conducting an audit of the NAB Introducer Program controls.

• The event will be assessed under NAB's Significant Event Review Panel (SERP) process.

These further investigations will also enable NAB to establish whether any customers have been impacted as a result of this event and will update ASIC further should we have any findings of customer detriment.

Should ASIC want to discuss this matter further, please do not hesitate to contact Kylie Young (Head of Group Regulatory Affairs - Conduct) on

Yours sincerely

Group Executive Personal Banking National Australia Bank Limited

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