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Commonwealth Bank of Australia loses 19.8 million customer account records

Today was the day that National Australia Bank Ltd. (ASX: NAB) was due to take the headlines with its half-year results release, but instead one of its big four banking rivals looks likely to steal its thunder.

The Commonwealth Bank of Australia (ASX: CBA) share price will be on watch today after the banking giant admitted to losing the data of 19.8 million customer accounts in May 2016.

What happened?

According to the release, the bank was unable to confirm the scheduled destruction by a contractor of two magnetic tapes filled with historical customer statements which include customer names, addresses, account numbers, and transaction details from 2000 to early 2016.

Commonwealth Bank has stressed that the tapes did not include passwords, PINs, or other data which could be used to enable account fraud.

It also advised that an independent forensic investigation order by the bank in 2016 and conducted by KPMG determined that the most likely scenario was that the tapes had been “disposed” of. As a result, it decided against notifying customers and stepped up its monitoring of impacted accounts.

Commonwealth Bank did, however, notify both the Office of the Australian Information Commissioner and the Australian Prudential Regulation Authority (APRA) and provided them with the results of its investigation.

In order to stop this from happening again, it immediately put in place monitoring mechanisms to further protect customers.

Angus Sullivan, acting group executive of retail banking services has stated that: “We take the protection of customer data very seriously and incidents like this are not acceptable. I want to assure our customers that we have taken the steps necessary to protect their information and we apologise for any concern this incident may cause.”

What now?

I was really surprised to learn how the bank treated customer data so carelessly in the past and can’t help but feel that this is yet another PR disaster for it.

And while it is unlikely to be repeated in the future now that safeguards are in place, I wouldn’t be surprised if there were a backlash from customers.

Investors may want to hold off an investment in Commonwealth Bank until the dust settles.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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