The Hon Rob Stokes MP, was the guest speaker at a recent Sydney Financial Forum public event. The Minister gave a broad overview of the NSW planning agenda to a capacity audience of leaders from business, Parliament, unions and academia.
Mr Stokes spoke about the importance of governments applying both an economic and a planning framework when making long term decisions around population and community development. He said that many sub-optimal development outcomes of the past could be attributed to only viewing proposals through the lens of a financial business case. He also answered questions from the audience relating to managing competing stakeholders in planning decisions, the current scope of development in Sydney, long term planning for growth in regional areas, and planning for the impacts of environmental phenomena such as the current drought.
The Sydney Financial Forum is grateful to the Minister for making himself available to speak with our network of members. We also thank our hosts, EY, for their generous hospitality in providing the venue and lunch refreshments, and our event sponsors, First Sentier Investors, for their ongoing support.
The Sydney Financial Forum was pleased to host the Australian Statistician, David W. Kalisch, at a recent invitation-only boardroom luncheon. As head of the Australian Bureau of Statistics, Mr Kalisch shared a number of insights into data, cybersecurity risks and organisational leadership. Mr Kalisch spoke about some of his experiences of the 2016 Census, and provided attendees with valuable perspectives on how to ensure their organisations were well equipped to deal with data-related risks. He also spoke of the growing trends in real-time data capture, and how this further enhances the economic value of data, enabling government and business to plan and operate more effectively.
The 24 attendees included company directors and senior executives from both the private and public sectors. Attendees were given the opportunity to ask questions and share their views in discussion around the table, which was moderated by the Chairman of the Sydney Financial Forum, Peter Achterstraat AM.
The Forum extends its sincere thanks to Mr Kalisch for his presentation and also to KPMG for their generosity in putting on the lunch at their Barangaroo premises.
Strengthening corporate culture and internal controls are effective safeguards against the type of scandals which have plagued Australia’s major banks, according to outgoing Australian Securities and Investments Commission (ASIC) chair Greg Medcraft.
It comes as a series of financial planning, life insurance, money laundering, and trading scandals have raised the ire of bank customers in recent years and fuelled calls for a Royal Commission into the sector.
“When somebody is very trusted and suddenly breaches that trust, then the ramifications are far more severe because they were trusted – I think that's what we're seeing playing out,” he told an audience at a recent Sydney Financial Forum event.
Medcraft, whose six-year term as ASIC chair ends on November 12, said the banks had suffered from “extreme hubris” and are only now starting to realise the reputational impact of their actions. At the same time, Australia’s major banks collectively reported a record $15.6 billion net cash profit for the 2017 half year while return on equity remained healthy at almost 14%.
“They'll certainly have to change and, frankly, the days of 14% return on equity are probably going to be a lot harder,” he said. “The Australian banks, when you think about it, are a really privileged oligopoly and, also… were very lucky because they didn't really get hit in the same way the US banks and European banks were by the crisis.”
Australia’s banks are among the strongest in the world but face increasing pressures such as new local and global regulations that will require them to hold more capital.
Medcraft has particular insight into the sector: he spent nearly 30 years at investment bank Societe Generale before joining the corporate regulator in 2009. While the sector is currently trying to patch up its battered reputation, he says it is also facing digital disruption which may radically reshape its central position with customers.
“The big challenge for them is how do you engage in a new digital world where the days of actually having a monopoly on a customer won't exist because there'll be open data and you'll have to compete on more platforms?
“Where you'll probably want to be is that trusted platform which has engagement with customers,” according to Medcraft, who also says the big banks will continue to sell many non-core business divisions.
Australia’s big banks are attempting to win back customer trust, most recently scrapping ATM withdrawal fees for customers of other banks.
Speaking more broadly, Medcraft said ASIC remains focused on corporate culture, which is a key driver of corporate conduct, as well as the importance of internal controls. This remains a challenge for directors who have to be cognisant of a company’s social contract with the community as well as its legal obligations.
Medcraft said the days of companies selling legally compliant but harmful products were ending thanks to social media scrutiny and the 24-hour news cycle, pointing to recent examples such as life insurers changing the terms of policies without informing policyholders.
“It's legal, but it was very harmful – and the community judged it as being appalling.”
He said one way to measure culture is through reporting dashboards, which track staff surveys, exit interviews, customer complaints, and the proportion of staff receiving ethics training. However, another good sign is a CEO who is comfortable allowing lower levels of management to address the board at meetings.
“Often if you get a dominant CEO or dominant chair, that can be quite dangerous if they're acting as the funnel.”
While culture is an important driver of behaviour, lax internal controls were often the root cause of many recent regulatory breaches. Medcraft said it was also a recurring theme discussed at the International Organization of Securities Commissions (IOSCO), where he served as chair from 2013 to 2016.
“The person who’s managing compliance is too junior to talk to a business line head or is not seen as senior enough, or they don't even have a compliance department,” he said.
Medcraft is set to join the OECD as the director of financial and enterprise affairs after his ASIC term ends.
While he pointed to more than $1 billion repaid to investors during his tenure and more than 350 convictions, he said his biggest achievement was introducing an industry funding model to help pay for the regulator’s work. The regime, which began on July 1, provides a strong incentive to self-regulate.
“I really wanted a price signal – those sectors that do a good job, which don't require our attention, should pay less than those that are demanding more of our attention.”
Medcraft also said ASIC had recently used new government funding to build portals to communicate with industry, employ data scientists, and shift around 300 Lotus databases onto new technology.
“We have an antique if anyone is buying.”
Some are calling it the future of Sydney. At the very least, Barangaroo will be a spectacular waterfront precinct and a showcase for Sydney’s economic growth and development. Barangaroo is Sydney's largest redevelopment project this century, valued at over $6 billion. Estimates show annual revenue of some $1.5 billion flowing into the NSW economy.
Members of the Sydney Financial Forum were addressed by Geoff Wilson (CEO, KPMG) and Steve McCann (CEO and MD, Lend Lease) as they shared their insights into the development and future of Barangaroo. Geoff and Steve will also discuss issues particularly relevant for superannuation and financial services executives including:
• How will Barangaroo influence the development of the financial services industry in Sydney and Australia?
• What lessons have been learnt from the development of similar precincts, for example London’s Canary Wharf?
• Does the Barangaroo development experience provide insight into the development of future private-public partnerships in NSW?
• An update on the major investors and prospective Barangaroo lease holders.
Members of the Sydney Financial Forum heard from the NSW Transport Minister the Hon Gladys Berejiklian MP about the NSW Transport Master Plan and opportunities for engagement with the financial services industry.
The NSW Long Term Transport Master Plan sets a clear direction for transport in NSW for the next 20 years, bringing together all modes of transport, across all regions of the state into a high-functioning, integrated network. But how will the NSW Government realise its ambition of delivering a world class infrastructure for the people of NSW?
The session covered:
• What has the detailed consultation, technical analysis and research revealed?
• What are the funding and delivery timeframes?
• Price tag: $53 billion in the first four years: how will it be funded and what are the total cost parameters?
• What are opportunities for private sector investment?
This Forum is presented in partnership with Colonial First State Global Asset Management
The Inaugural Sydney Financial Forum Think Tank was held in April 2010. This half-day meeting included senior leaders from across the financial services sector.
The Think Tank stirred thought and discussion on significant issues central to future and growth of Australia’s financial services industry and central to Sydney’s role as the financial services hub of the nation.
Opened by the Treasurer of NSW and the recently appointed Chair of Finance and Superannuation at UTS, Dr Susan Thorpe, the following speakers gave presentations:
- The Hon Mike Baird, Treasurer of NSW
- Dr Susan Thorp, Professor School of Finance and Economics, Chair of Finance & Superannuation, University of Technology Sydney
- Mark Birrell, Chairman, Infrastructure Partnerships Australia
- Stephen Knight, Chief Executive, New South Wales Treasury Corporation
- Raphael Arndt, Head of Infrastructure, FutureFund
- Quentin Dempster, Journalist, ABC (moderator)
- Dr Chris Caton, Chief Economist, BT Financial Group
- Kate Howitt, Portfolio Manager Australian equities, Fidelity
- Dr Shane Oliver, Chief Economist, AMP Capital Investors
- Dr Don Stammer, Company Director and economic commentator
In October 2012 the Sydney Financial Forum ran an address 'By Sea / By Air – is NSW up to it?' with Kerrie Mather, CEO, Sydney Airport Corporation Limited and Ann Sherry, CEO, Carnival Australia
as guest speakers.