October 27, 2020
The ASIC chair’s expenses scandal refuses to dieIt’s hard to imagine things getting worse for ASIC chairman James Shipton, but sure enough they did in Senate estimates on Tuesday.
No matter where she turned, and despite her conciliatory demeanour, acting chairman Karen Chester and her ASIC chums faced a bank of hostile senators, keen to draw blood over relocation and other expenses claimed by Shipton and his enforcement offsider Daniel Crennan QC.
The climax came early when committee chairman and senior Liberal James Paterson asked Chester a question, which left her no option but to abandon Shipton to his fate.
While Auditor-General Grant Hehir first raised concerns about Crennan’s accommodation expenses in Sydney, amounting to $70,000 or $750 a week, in its closing report in 2018-19, ASIC’s governance machinery failed to crank into gear until much later.
After much internal to-ing and fro-ing, it was not until last May that the regulator asked the Australian Government Solicitor to seek a waiver for the expenses in a formal submission to the Remuneration Tribunal.
Crennan saw the AGS advice, and with Hehir’s concerns in mind, sensibly took the initiative himself to stop the payments.
Paterson asked the obvious question: if the Auditor-General had expressed his concern that Crennan’s expenses were outside the guidelines, why didn’t ASIC call a halt to them until their status was clarified?
Chester’s answer was blunt and to the point: “I think you are asking me a question that should be asked to Mr Shipton.
“I’ve explained the background, the context, the documentation and the chronology as I understand it, but it’s fair to say we did not have a full information set.”
Shipton’s oversight of Crennan’s expenses has now been called into question by his deputy and possible successor, and that’s before any consideration of the issues surrounding his own, $118,000 expenses claim for tax advice from KPMG.
The fundamental, wider issue, which will be examined by an independent Treasury review, is why ASIC sat on its hands for so long before taking serious action.
Chester volunteered that the regulator’s response was “glacial”.
Paterson offered his own description — “non-existent”, at least in the prolonged, earlier phase.
It’s no wonder that Hehir reached the conclusion that he had to raise the debacle personally with Josh Frydenberg.
In his October 22 letter to the Treasurer, he said: “I formed a view in the course of the (ASIC) audit that in order to gain greater confidence that appropriate action would be taken, I should indicate that I would bring the matter to your attention.”
NAB’s regular one-offsIt’s just as well the market values companies on future rather than past earnings, because National Australia Bank’s predilection for massive provisions and writedowns over the past two decades could have risked permanent damage to its franchise.
Over the past week, NAB and Westpac and ANZ have pre-announced $450m, $1.2bn and $528m, respectively, in one-off items, ahead of their full-year results.
It was NAB’s seventh consecutive half-year of big hits to its bottom-line profit, contributing to an extraordinary $20bn sea of red ink stretching back to 1998.
On UBS numbers, that amounts to well over double the combined one-offs for the other three major banks, or 15 per cent of all profit generated by NAB over the last 22 years.
While the market tends to “look through” irregular items and focus on underlying earnings, you could mount a pretty solid argument that NAB’s one-offs have become a permanent feature.
Despite this, investors are backing a new management team, led by chairman Phil Chronican and chief executive Ross Mc-Ewan, to bridge the yawning gap between above-the-line and below-the-line profit.
Unlike some of their NAB predecessors, Chronican and Mc-Ewan are career bankers, with McEwan rating NAB’s leading business bank as one of the nation’s two premium banking franchises, along with CBA’s retail business.
If Chronican and McEwan can’t restore NAB to something approaching its pre-1998 glory, it’s hard to conceive of someone else doing a significantly better job.
NAB, of course, is heavily exposed to the dormant Victorian economy, which was eased back to life on Monday when Premier Daniel Andrews flagged that COVID-19 restrictions would be eased.
Cognisant of the pandemic’s heavy impact on his core franchise, McEwan urged small and medium-sized businesses to embrace the economy’s reopening.
“Businesses right across Melbourne now have the certainty they need to open their doors and to get people back into work, which is great for the state, and for Australia’s economic recovery,” he said. “Today is a big step but many of our customers are still doing it tough and there is a long way to go.”
NAB’s heavy exposure to Victoria, SMEs and high-net-worth individuals means McEwan won’t be shooting the lights out when he reports NAB’s full-year profit on November 5.
The outlook is for top-ups to economic overlays in the 2020 financial year and higher credit charges in 2021.
That said, the broader economy is starting to recover, and the expected ravages of the recession have been mitigated by the federal government’s unprecedented policy support.
Hopefully, though, McEwan was adhering to the maxim that you should never waste a crisis when he announced last week’s one-offs.
The appetite for more of the same is wearing thin.
