Financial Inclusion, market failures and new markets: Possibilities for Community Development Finance Institutions in Australia (pdf) written by Dr Ingrid Burkett and Belinda Drew discusses Community Development Finance Institutions which are independent organisations focussed on the use of financial mechanisms to develop and service people, organisations and communities who have been excluded from or underserved by mainstream financial institutions.

The review compares the underdeveloped sector in Australia with the UK and USA and opportunities for growth. It includes discussion on the role of credit unions.

Who’d have thought that we’d end the year with a government guarantee for credit union and building society deposits, falling interest rates, increasing regulation (less of a surprise) and a decimated securitisation sector?

Who’d have thought we’d hear directors of a major listed company (James Hardie) deny the accuracy of board minutes and admit that they didn’t read all their board papers?

That St George Bank and Bank West would be no more than brand names?

That the stock market and superannuation funds had lost billions of dollars?

And that despite increasing supervision, huge frauds were still being perpetrated?

When we started the year, we had a new Federal Labor Government, interest rates were rising, the sub-prime crisis had just started, liquidity was a looming issue and de-regulation was the catchcry. Margin lending and short selling were commonplace.

By mid-year, the prudent managers had gone “back to basics”.

What’s in store for 2009?

My tips: continuing emphasis by regulators on systems and controls, compliance, governance, liquidity, capital and disclosure.

The Mutual Banking Code of Practice, the EFT Code changes, new personal property securities law and the transfer of consumer credit regulation to the Commonwealth will have an impact on procedures and operating costs during the year .

Privacy and data breaches will be an increasing risk as credit unions rely more and more on technology.

Competition from the big banks will increase. But corporate ethics and mutuality will become more important.

Mergers will continue as increasing pressure is placed on boards and management.

And there’ll be quite a few things that I didn’t see coming!

Here’s to a successful 2009!

The Private Health Insurance Administration Council (PHIAC) is an independent Statutory Authority that regulates the private health insurance industry. PHIAC has had a busy year.

In 2007 PHIAC supervised the demutualisation and ASX Listing of NIB (here).

Although the new government decided not to privatise Medibank Private, this year MBF also demutualised.

Subsequently the following mergers have occurred:

• MBF’s acquisition by BUPA Australia;
• Australian Health Management acquisition by Medibank Private;
• Manchester Unity acquisition by HCF.

PHIAC has announced that it will restructure to bring a stronger focus to its statutory role of protecting the interests of consumers of private health insurance, including to make sure it can deal quickly and effectively in the (unlikely) event that there is a major prudential crisis within the PHI industry.

PHIAC will be rolling out a suite of prudential standards.

Capital standards have already been reviewed.

A draft standard on Corporate Governance is currently circulating within the industry for comment by 6 March 2009.

The draft standard includes rules on:

• board composition;
• independence of directors;
• chairperson;
• residency of directors;
• director associates of shareholders;
• board charter;
• delegation;
• board policies;
• board performance;
• board renewal;
• board audit committee;
• conflicts of interest;
• internal audit.

It is clear that health funds will be coming under greater regulation and that PHIAC expects boards to be fully involved and responsible for their organisations.

Langes have had experience with these types of standards for listed companies (ASX) and financial institutions and insurers (APRA). Call us if you’d like to discuss key issues.

Today I attended the funeral of credit union advocate Philip Elliott. Over a period of more than 30 years Philip promoted credit union ideals through trade associations and government lobbying for policy and legislative changes. Philip's passing at 62 was a shock to all.

A colleague commented to me that Philip was the person you went to when you wanted to know "why" a certain thing was done a particular way or how things in the organisation had occurred in the past.

Whilst it is always important to innovate, it is equally important to understand why existing systems were set up and to understand the historical context of an organisation. "Grey hairs" can be useful at times!

If you have a "go to" person in your organisation, try to retain some of his or her knowledge in a wiki, blog or other record to make sure your corporate memory is not lost if they leave suddenly.