ASIC pushes for more regulatory powers

ASIC has drawn a line in the sand against APRA and called for increased powers for it to combat superannuation fund failures.

AMP chairman David Murray. Illustration: Sturt Krygsman

ASIC has drawn a line in the sand against APRA and called for increased powers for it to combat superannuation fund failures, arguing “there is a significant role for strategic conduct regulation”.

The message being that the closed-door APRA prudential regulation needs some high-profile regulation to get real action and ASIC is the body to do it. This push for increased regulatory powers comes as the banking royal commission is focusing on the litany of regulatory failings in the sector.

Its renewed push for power came in its submission to the Productivity Commission in which it noted that APRA’s role in superannuation regulation was “different to its traditional prudential role”.

ASIC noted that its own powers in superannuation were limited in that it can’t institute civil penalty proceedings and on key areas like best interest provisions it is limited to disclosure breaches.

The corporate cop, which has had its powers elsewhere endorsed by the government, noted that further law changes would be needed to give it the necessary power.

It argued: “There is a significant role for strategic conduct regulation that goes beyond disclosure and addresses misconduct relevant to outcomes.”

The corporate plod also backed the PC’s push for structural reform in the industry, including the establishment of a “best in show” system for default super funds.

The PC is recommending a list of the top 10 performing funds compiled by a committee of regulators be used to select default funds instead of the present system in which they are often set by industry awards.

ASIC noted: “Employers currently have no obligation to select a default fund that is in the best interests their employees, nor to put their employees’ interests ahead of their own in selecting a fund.

“This naturally creates an environment in which conflicts can arise and more generally where the employer may not place significant importance on the selection of a default fund.”

The plod said the interests of employees and employers was the key. “ASIC supports improvements to the policy framework for default fund selection as a key requirement for better consumer outcomes.”

Its interest in the field is to be welcomed, but what punters would like is a regulator that actually enforces the law and time will tell how new chief James Shipton performs.

Unders and overs

Stock price underperformance heading into results day does wonders for the short-term reaction to the numbers, provided the company has no more bad news to share.

AMP was up 4 per cent at $3.48 yesterday after underperforming the market by 40 per cent since its February results.

CBA underperformed by 10 per cent heading into the numbers and rose 2.7 per cent to $74.89, while Tabcorp underperformed by 19 per cent going in to yesterday’s results and saw a 7.8 per cent bounce to $4.85 a share.

In all three results it was a stretch to say the numbers were a cause for joy, but that tells you a little bit about how the market works as there was a touch of relief rally about it.

AMP pre-announced its profit and yesterday revealed outflows totalled $870 million in the half. The good news is that while there was an outflow the rate of decline post the royal commission debacle has slowed.

Acting chief Mike Wilkins is also getting the shop back into order, rolling out the landmark Goals 360 Degree software and proceeding apace with a strategic review

Cost control was the star of the AMP result and, while the market likes good cost management, it also knows greatness doesn’t flow from cutbacks.

Meanwhile, AMP chairman David Murray has continued his career-long performance of earning top dollar (his salary of $850,000 is bigger than that of three out of four top four bank chairmen).

Narev’s pay cut

Former Commonwealth Bank boss Ian Narev lost more than $13.9m in long-term bonus payments last financial year with a ­potential award of 188,524 share rights cancelled.

Narev picked up $6.6m in deferred bonuses in 2016 to boost his pay to $12.3m, the equivalent of 246 tellers.

When he left the bank in April he held 163,414 CBA shares worth $12.2m and paying $704,314 in dividends. The rent is safe.

The bank’s governance snafus meant a range of senior executives were stripped of $100m in total bonus payments over the past two years.

Chief risk officer and former general counsel David Cohen increased his pay last year to $2.8m, from $2.2m. Former head of wealth Annabel Spring, who was also given termination pay in contrast to some others, agreed to forfeit a $532,000 short-term bonus but left with $1.9m.

Rob Jesudason walked away with $539,000 in termination pay.

Former institutional banking boss Kelly Bayer Rosmarin walked away with $2.3m, including close to $1m in termination benefits, but this was less than the $5.1m she could have taken with her had long-term rights been paid.

Former technology chief David Whiteing walked away with $2.1m, including close to $1m in termination benefits. The current CEO boss Matt Comyn picked up $1.3m in fixed pay last year with total pay including past bonuses of $2.8m.

Comyn’s restraint

There has never been a better time to release a soft profit number and CBA’s Matt Comyn did just that while showing commendable restraint by not completely kitchen-sinking the numbers with bucket­loads of provisions.

Politically, in case you haven’t noticed, banks are on the nose so it wasn’t time to hit out of the park, but the reality is the credit climate is tough and bank revenue was down 3 per cent with return on ­equity down from 15.7 per cent to 14.1 per cent.

CBA earns 60 per cent of its money from mortgages, which on numbers from CLSA’s Brian Johnson range in returns from 33.3 per cent for principal-and-­interest home-owner loans funded by five deposits to 56 per cent for investor interest-only loans.

Shareholders were looked after again with dividends up 2c at $4.31 a share, even though returns were down along with profits.

It’s been a year or two of regulatory and governance hell for the industry and CBA especially, but this result in a weak credit climate showed extraordinary resilience.

There are pockets of stress in WA and the Northern Territory, but the market is rolling along at an albeit slower pace.

This gives Comyn the confidence to proceed with plans to simplify the business, boost a digital business that has 5.1 million mobile app log-ins a day, with 6.5 million active customers and 27 billion data points refreshed daily and 21 million daily interactions.

As tipped, the bank has sold out its stake in South African-based TYME for a $91m impairment shutting down some global upside.

But Comyn suggested the bank might maintain the rights to the digital account opening services in Indonesia, considered a core ­market. The new boss presents a more humble persona, which he should, given the snafus.