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Australian Regulatory Compliance Review
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It has been revealed by the Bank of England that a secret internet chatroom helped keep London’s financial markets open after the recent bomb attacks.
The Bank of England, the Treasury and the Financial Services Authority switched to the chatroom to talk to the major banks about how they were coping.
The secure chatroom is located on the government’s Financial Sector Continuity website.
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APRA Chair John Laker recently presented a paper called EMERGING ISSUES IN THE PRUDENTIAL LANDSCAPE to the Building Society Association Directors’ Forum.
He discussed credit issues as well as general regulatory issues.
He also made some interesting comments about a second evolving business model for business societies:
I would characterise the two main models as:
• the ‘traditional’ — societies that focus primarily on writing standard housing loan products to retain on-balance sheet. Few if any off-balance sheet activities are undertaken; and
• the ‘securitisor/manager’ — at the other end of the spectrum, societies that focus primarily on converting their housing loan assets into tradeable securities, and managing the securitised assets…
Directors of building societies pursuing the securitisor/manager model need to satisfy themselves that their society:
• has a robust risk management framework for securitisation activities which identifies the range of inherent risks involved and establishes processes for monitoring and mitigating these risks;
• has a management information system that can provide a comprehensive reporting of all costs and income associated with these activities. These costs should, of course, include the origination costs of loans sold to the securitisation vehicle; and
• conducts appropriate analysis of the profitability and long-term viability of these activities. This analysis should involve allocation of an amount of ‘economic capital’ against the risks in securitisation and an assessment of return on capital against the society’s hurdle rate.
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SAI Global have issued a draft Australian Standard on employment screening for comment.(PDF, free registration required).
It provides a helpful flowchart of the processes involved.
Impoprtantly it recommends reference checks with employers for the last 5 years. But it does not recommend checking for professional disciplinary action. This could be important.
Evidence to the current Bundaberg Hospital Commission of Inquiry has disclosed that a doctor appears to have fraudulently altered his professional documents to remove evidence of disciplinary action against him (which a simple Google search could have found). The document was taken at face value with no checking by the local registration body.
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Even though there is no Australian legal definition of what is a "mutual" (they are typically bodies where members have identical shareholding and equal voting rights), their characteristics are well understood.
In the Guardian article Our Mutual Friends, Professor Jonathan Michie argues that co-ops and mutuals are on the way back in Britain despite recent privatisation and demutualisation.
A key quote:
Would it matter if the remaining co-ops and mutuals turned into private companies or companies listed on the stock exchange (plcs)? One way of judging that is to consider whether the managers of such organisations behave differently because of their ownership structure. A … survey we carried out, of managers within the sector, found that the organisational form clearly does influence behaviour and decision-making. That is due not just to the organisations being owned by the members rather than shareholders, but also to the different organisational culture that this fosters.
Managers of plcs are made aware that they owe a legal duty to shareholders. In co-ops and mutuals, managers are equally aware that they owe a duty to the members and to the principles that underpin the mutual and cooperative movement, including "concern for community".
Co-ops and mutuals behave differently in three crucial ways. First, concern for community translates into higher charitable giving, both in cash and in kind. Second, business decisions give a greater weight to community interests, for example by keeping branches open in rural areas. Third, management decisions give a greater weight to the interests of members, prioritising quality of service over profits.
He argues that the value of mutuals is not recorded in standard economic data. For example:
If a private company boosts profits, this may be recorded as a greater contribution to
national income; if a co-op or mutual decides to forgo such opportunities, and concentrates on quality of service, the benefit to the economy may go unrecorded.
Recently, Treasury argued that it was too difficult to define mutuals or to create special rules for them (in this case, for the purpose of new rules for convening shareholder meetings). A "one size fits all" approach to regulation could result in the loss of a special type of organisation, to the detriment of the community.
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A second draft of the guideline on consumer protection laws for those involved in the debt collection industry has been issued by the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC).
In light of the submissions received, ASIC and the ACCC have decided to undertake a further round of consultations before finalising the guideline.
New or revised content in the guideline includes:
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