Welcome to Edition 44 of Boardroom Brief.
This is a service specifically targeted at the needs of busy non-executive directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.
KEY BOARDROOM BRIEF
The Royal Commission “we had to have”. The big news last week (although the result of relentless political pressure over the prior month or two) was the announcement by Prime Minister Malcolm Turnbull, and Treasurer, Scott Morrison, that the Government will establish a Royal Commission into the alleged misconduct of Australia’s banks and other financial services entities — see the Treasurer's media release. The Inquiry will consider the conduct of banks, insurers, financial services providers and superannuation funds (not including self-managed superannuation funds). It will also consider how well equipped regulators are to identify and address misconduct. The Government has claimed that continued uncertainty over a potential review of the banking sector has undermined confidence in the sector and the Commission is a way to clear the air. While the Prime Minister has promised that this will not turn into a “lawyers picnic”, Directors of financial services companies should brace themselves for a busy year ahead, no doubt with lawyers occupying the boardroom more often than they have in the recent past. You can find the draft terms of reference for the Commission here.
ASIC reports on cyber resilience assessments of financial markets firms. Directors with an interest in the state of cyber-resilience in Australia will find an interesting resource in ASIC Report 555 Cyber resilience of firms in Australia’s financial markets (REP 555). The report collates and analyses the results of self-assessments from over 100 stockbrokers, investment banks, market operators, post-trade infrastructure providers and credit rating agencies, and while it shows a growing understanding of cyber risks, there is still some progress to be made. Not surprisingly, ASIC found that large organisations with access to specialist skills and resources demonstrate a relatively high degree of cyber resilience compared to small and medium-sized enterprises– some of which are just beginning to develop their cyber resilience. See ASIC’s media release.
MMA Offshore Limited - Declaration of unacceptable circumstances and undertaking. An interesting case before the Takeovers Panel last week saw the Panel make a declaration of unacceptable circumstances regarding an application by Halom Investments Pte Ltd (Halom) dated 17 November 2017 in relation to the affairs of MMA Offshore Limited (MMA). The Panel found that the circumstances were unacceptable as they would have, or were likely to have an effect on the control or potential control of MMA or the acquisition, or proposed acquisition, by a person of a substantial interest in MMA and having regard to the purposes of Chapter 6 set out in section 602 of the CA 2001. Directors contemplating a significant capital raising should bear in mind the potential control implications of the raising and ensure that the structure adopted does not risk disenfranchising some shareholders, particularly if a significant vote looms. See Panel’s media release for further information.
THE WEEK AHEAD
Going nowhere: last rates decision for 2017. A recent OECD report suggesting it was time Australia’s Reserve Bank looked to hike rates appears to have fallen on deaf ears, with near unanimous consensus that the RBA will leave the cash rate unchanged at 1.5% at Tuesday’s meeting, the last before Christmas and (if the consensus proves accurate) the 15th straight with no change in rates. Of course, the OECD is beginning to sound like a broken record, with similar calls to hike interest rates in line with international peers being made – and ignored – in November 2016. Westpac Chief Economist Bill Evans stated the position succinctly when commenting on the RBA’s November Statement on Monetary Policy, in which it reduced its underlying inflation forecasts to 1.75% in 2018 and 2.0% in 2019 (the latter down from 2.5%). “These forecast changes represent a clear downgrading of the Bank’s outlook for inflation pressures”, he said, adding that he thought the RBA was very unlikely to follow the OECD’s “advice”. Next week will also see the release of October housing finance data, which is expected to point to a continued slowing in credit growth, in line with cooling house prices and a weakening A$, as noted in last week’s Boardroom Brief.