The Commonwealth Bank of Australia (ASX: CBA) share price is down 3% today amid reports that the bank has reportedly referred loan fraud to the police.
Commonwealth Bank is Australia’s largest ASX bank share, along with National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC) and ANZ Group Holdings Ltd (ASX: ANZ).
Oil price causes pain
The main reason that the Commonwealth Bank share price is down 3% is seemingly due to the fact that most of the S&P/ASX 200 Index (ASX: XJO) share market has declined heavily. The ASX 200 itself is down 3% following a huge jump in the oil price amid the events in the Middle East.
If the oil price is sustained at this high level, or goes up even more, it could lead to rising inflation and possibly higher interest rates. This dynamic hurts asset prices, which is why investors are selling now before the effect has flowed through the economy.
Loan fraud
At the end of last month, the Australian Financial Review reported that around $1 billion in home loans were obtained “fraudulently” amid a jump in doctored applications, including documents created by artificial intelligence.
Today, the AFR reported CBA has referred two mortgage brokers and some accountants to the police as it looks to figure out the fraud which relates to those fake documents (and international funds).
The AFR reported that the false documents included fake income statements, draft tax returns and shell companies.
The newspaper reported that a CBA official said that the banking sector faced ongoing and rising levels of attempted fraud, with criminals evolving their methods. The official also said:
This is an industry-wide challenge, with fraud being attempted through mortgage broking and referral channels.
Final thoughts on the Commonwealth Bank share price
$1 billion of potential loan fraud is obviously a large number, but at the same time it’s not a big portion of the ASX bank share’s loan book. I’d be wary of any possible regulator response, though at this stage I don’t know what that might be.
For me, there are other ASX dividend shares I’d rather buy that have greater earnings growth potential over the long-term. I view this overall market decline as a time to look for great value ASX shares.
