Australia’s banking regulator has ordered an independent inquiry into Commonwealth Bank of Australia following a raft of scandals that have focused attention on the nation’s largest lender.

The Australian Prudential Regulation Authority said on Monday that the investigation would focus on governance, culture and accountability frameworks and practices at CBA. The decision follows a money laundering scandal in which the bank’s systems were allegedly used by drug dealers and other criminals to launder tens of millions of dollars in cash.

“The over-arching goal of the prudential inquiry is to identify any core organisational and cultural drivers at the heart of these issues and to provide the community with confidence that any shortcomings identified are promptly and adequately addressed,” said Wayne Byers, APRA chairman.

The inquiry comes amid a series of scandals in the industry that have turned a spotlight on alleged rule-breaking by Australian banks. It is the latest in a salvo of regulator actions against CBA, which is being sued by Austrac — Australia’s financial crime fighting agency — in relation to the money laundering allegations.

CBA also faces an inquiry by Australia’s securities regulator, which is investigating whether the bank’s board complied with continuous disclosure laws when it decided not to alert investors to the regulator’s concerns. In addition, the lender faces a likely class action lawsuit over the money laundering case.

This latest inquiry will be conducted by an independent panel, to be appointed by APRA. It will provide a report to the regulator after about six months, which will make recommendations for organisational and cultural change at CBA, according to the prudential regulator.

“CBA is a well-capitalised and financially sound institution. However, beyond financial measures, it is also critical to the long-run health of the financial system that the Australian community has a high degree of confidence that banks and other financial institutions are well governed and prudently managed,” said Mr Byers.

“The Australian community’s trust in the banking system has been damaged in recent years, and CBA in particular has been negatively impacted by a number of issues that have affected the reputation of the bank,” he said.

CBA said it welcomed the inquiry and would co-operate with the regulator.

“CBA recognises that events over recent years have weakened the community’s trust in us,” said Catherine Livingstone, CBA chairman. “We have been working hard to strengthen trust, and will continue to do so. We welcome this opportunity for independent parties to review the work we have already undertaken and advise on what more we can do.”

Shares in CBA were down 1.4 per cent at A$76.66 near midday in Sydney on Monday.

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