Governance –

customer accountability and participation

Goal five: excellence in governance.

Competent well qualified leadership

bankmecu will maintain its competence and expertise to oversee its customer-owned and responsible approach to banking. This will be reflected in a process of Board renewal that ensures it remains open to new ideas and independent thinking.

Board of Directors

Term

bankmecu is governed by a Board of Directors, the majority of whom are elected by customers annually on a rotational basis for a three-year term. The Board appointed two Directors to ensure adequate skill set. The Board appointed the Chief Executive as Managing Director.

Role

A Constitution, Board Charter, Governance and Fit and Proper policies govern Board conduct for Directors.

The Board’s role includes establishing corporate objectives, approving corporate strategy, policy and the budget, as well as appointing the CEO and evaluating their performance, supervising the operations of bankmecu and ensuring that bankmecu operations are aligned to its stated values. The Board has ultimate responsibility for the application of APRA prudential standards, Australian Corporations Law and other regulations as they apply to bankmecu.

Independence

To ensure the Board operates in the interests of all customers, all Directors are required to declare any possible conflicts of interest so the Board can take appropriate action to deal with such conflict.

Five bankmecu non-executive Directors are customer-owner elected and independent. Two are appointed by the Board and independent. The Chair of the Board of Directors is independent and not an executive officer of bankmecu. There is one executive Director – the Managing Director.

The Board defines ‘independence’ in accordance with its Governance Policy and the Australian Stock Exchange (ASX) Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice.

Expertise and performance evaluation

Collectively, the Board of Directors has a broad skill-set and a range of professional experiences from which knowledge can be drawn.

bankmecu’s Fit and Proper Policy and Governance Policy outline processes to ensure an appropriate level of expertise on the Board needed in order to guide bankmecu’s strategic direction:

  • a three-year Director election cycle provides bankmecu’s customer-owner base with a democratic process to assess suitable Directors and seek renewal on the Board
  • a Nominations Committee interviews Director candidates to assess their fitness and propriety for being a Director of bankmecu. This includes probity checks and an evaluation of required skills and expertise
  • an annual review of Board and Director performance including individual and peer assessment is facilitated and commented on by an independent external consultant.
  • a skill set audit is required annually to assess available Director skills against those required for satisfactory Board performance
  • options are available to appoint suitable Directors if required to cover any deficit in skill set
  • opportunities for ongoing professional development are made available
  • a number of Directors are Fellows of the Australian Institute of Company Directors; and
  • the Board conducts annual strategic planning sessions to assist them in identifying and managing economic, environmental and social risks and opportunities faced by bankmecu.

Refer to bankmecu’s statutory Financial Accounts for Director qualifications and experience.

Board performance assessment

As part of its approach to corporate governance, the Board of bankmecu undertook a board performance self-assessment in 2012. That self-assessment used the Board Dimensions methodology developed by Cameron Ralph Pty Ltd.

The process used confidential customised questionnaires which were independently analysed by Board Dimensions and benchmarked against their database of responses from Australian directors. Board Dimensions provided a report to all Directors which highlighted the self-assessed strengths and weaknesses in the Board’s performance and made suggestions for improvement. Individual Director Feedback reports were also provided to each Director in relation to their own performance on the Board.

Management were also provided with the opportunity to assess the Board.

Director development and training

Directors undertake development and training to ensure they keep up to date on the issues, trends, skills and information that are essential for the effective performance of their role. Directors’ experience and qualifications are reported to customers each year in bankmecu’s Annual Report.

Board renewal

The Board, as part of its Governance and Risk Management framework, has a formal renewal program. The program aims to bring diversity, commercial experience, depth of expertise and fresh perspectives to the Board, whilst ensuring independence and professionalism of Directors. The renewal program is staged over a number of years to assist in ensuring the history, values and culture of the mutual organisation are preserved and built upon.

Constitutional limitations are put in place in relation to elected Directors, limiting their time on the Board to four terms, which equates to 12 years.

Board committees

As at 30 June 2012, the following Committees advised the Board:

  • Finance and Risk (meets monthly).

    -     Ron Dixon (Director and Committee Chair)

    -     Helen Clarke (Director)

    -     Greg Camm (Director)

    -     Damien Walsh (Managing Director)

    -     Robert Allen (General Manager Operations and Risk)

    -     Chris Newey (General Manager Corporate Services)

    The Finance and Risk Committee oversees and reports to the Board on the management of the financial affairs and associated risks (credit risk, interest rate risk, liquidity risk, capital risk, profitability risk, asset and liability risk) in accordance with the Board-approved budget, policies and APRA prudential standards. The committee is also responsible for oversight of non-financial risks.

    It provides advice and recommendations to the Board on matters relating to its responsibilities for ensuring that bankmecu’s values and stakeholders’ expectations are reflected in its policies and practices, principally in the areas of social and environmental impact and business ethics.

  • Audit and Compliance (meets quarterly).

    -     Peter Taylor (Director and Committee Chair)

    -     Peter Ford (Director)

    -      Judith Downes (Director)

    The Audit and Compliance Committee has oversight of internal and external audit, risk management framework, compliance with voluntary internal/external non-financial commitments, legal and regulatory requirements, Board policies, corporate governance requirements and bankmecu’s Constitution. It provides advice and recommendations to the Board on matters relating to its responsibilities for ensuring that bankmecu’s values and stakeholders’ expectations are reflected in its policies and practices, in the areas of financial, social and environmental impact and business ethics.

  • Governance (meets quarterly).

    -     John Baistow (Director and Committee Chair)

    -     Peter Taylor (Director

    -     Helen Clarke (Director)

    -     Damien Walsh (Managing Director)

    The Governnance Committee provides advice to the Board on bankmecu’s Constitution, Governance Policy, Fit and Proper Policy, remuneration policies and practices, governance of subsidiaries and related parties, and other issues of organisational governance.

  • Executive (meets as required).

    -     John Baistow (Board Deputy Chair and Committee Chair)

    -     Helen Clarke (Director)

    -     Damien Walsh (Managing Director)

    The prime objective of the Board Executive is to manage the governance of the Board.

  • Due Diligence (meets as required).

    -     Damien Walsh (Managing Director and Committee Chair)

    -     Helen Clarke (Deputy Board Chair)

    -     Ron Dixon (Director)

    -     Robert Allen (GM Operations and Risk)

    -     Rowan Dowland (GM Development)

    -      Chris Newey (GM Corporate Services)

    The Due Diligence Committee provides advice to the Board and customer-owners on mergers, demutualisation and takeovers.

  • Nominations (meets as required).

    -     Appointed consultant (Committee Chair)

    -     Appointed consultant

    -     John Baistow (Board Chair)

    The Nominations Committee provides advice in accordance with bankmecu’s Constitution and policies to the Board and customer-owners on the fitness and propriety of Director candidates.

Executive management (Managing Director and General Managers) attend committees as management with no voting rights, other than where appointed as a member of the committee. The Chair may attend committees as an ex officio member. For example, Finance and Risk, and Audit and Compliance.

All committee members are appointed annually after bankmecu’s Annual General Meeting. The Board reviews all committee charters on an annual basis.

Director remuneration

The total amount of Directors’ remuneration is determined annually at the Annual General Meeting by bankmecu customer-owners. A recommendation is put forward by the Governance Committee for customer-owner vote. Total remuneration last voted upon by customer-owners at the 2011 AGM was for the total sum of $491,270 per annum pro rata. This sum represents the total Board remuneration and not the amount paid to individual Directors. It is paid by way of fees, concessions and other benefits. The Directors determine how this sum is to be apportioned among themselves and how and when it is paid. The sum includes all relevant taxes payable either by bankmecu or Directors.

Operational structure

bankmecu’s approach to banking adopts systematic and balanced business strategies to satisfy the economic, social and environmental performance expectations of its stakeholders, while protecting, sustaining and enhancing the financial, human and natural resources needed to develop bankmecu into the future. The Board oversees development of bankmecu’s vision, purpose, values and brand objective, which it reviews annually.

Executive

The Managing Director is charged by the Board with the day-to-day leadership and management of bankmecu. Approval of the Managing Director’s compensation and benefits is the responsibility of the Board.

The Managing Director is supported by a senior management team who meet formally fortnightly and oversee the day-to-day management of the organisation. Recommendations to senior management and the Board incorporate economic, social and environmental considerations, as appropriate.

Organisational and management structure

Remuneration for senior management is determined annually according to an agreed set of performance outcomes including actions identified through external commitments for sustainable development (i.e. UNEP FI, UN PRI and UN GC). Levels of remuneration are set in line with comparable roles in the Australian mutual financial services sector.

Senior Managers are not paid bonuses.

Policies and practices

The precautionary approach is embedded in bankmecu’s policies, procedures and the prudential, socially responsible conduct of its business.

bankmecu has Board policies covering:

  • Anti-Money Laundering
  • Associations with Related Entities Risk Management
  • Board Human Resource Management
  • Business Continuity Management
  • Capital Adequacy Market Disclosure
  • Capital
  • Communications
  • Complaint and Dispute Resolution
  • Compliance
  • Credit Card Risk Management
  • Credit Integrity
  • Customer Ownership Policy
  • Dormant Customers and Unclaimed Monies
  • Environment
  • Finance and Accounting
  • Fit and Proper
  • Fraud Control
  • Governance
  • Large Exposure
  • Lending
  • Liquidity Contingency
  • Liquidity Risk Management
  • Market Risk Management
  • Merger Demutualisation Takeover
  • Operational Risk Management
  • Outsourcing
  • Privacy
  • Remuneration
  • Research and Benefits
  • Responsible Investment and Lending
  • Securitisation
  • Stakeholder Engagement

All policies are reviewed annually and updated where necessary. The Board of Directors approves all amendments to Board policy.

Policies are actioned through management guidelines and procedures available to staff on bankmecu’s intranet; and through staff training.

Productive democracy

bankmecu will explore new ways for customers to engage with the Bank and share constructive insights in direction setting, problem solving and delivering customer benefit.

Stakeholder engagement

As a mutually owned financial services organisation, bankmecu is committed to operating for the benefit of its customers while acknowledging others who have a ‘stake’ in the Bank, which may not be financial. bankmecu’s mutual ownership means customers and shareholders are one and the same, a critical distinction from many of bankmecu’s banking competitors.

bankmecu aims to align its values with those of its stakeholders, as well as ensure their expectations of bankmecu form a key part of organisational strategy, culture, operations and products. In addition, bankmecu is committed to transparency and disclosure of stakeholder’s opinions and queries.

bankmecu’s Stakeholder Engagement Policy provides a framework for the management of stakeholder engagement process. The policy provides a basis for identification and selection of stakeholders, identifies approaches to engagement and identifies the Company’s participation in external initiatives.

Stakeholder engagement actions are reported to the Board monthly through Executive reports.

The Board and customer involvement

Customers are able to provide feedback, recommendations and direction to the Board in the following ways:

  • writing to the Board
  • attending the Annual General Meeting (AGM) and Special General Meetings; or
  • calling a Special General Meeting.

The Board receives a monthly report detailing information on compliments and complaints received from customers. It is also committed to engaging with customers and stakeholders at events held for the purpose of learning about their needs and expectations of bankmecu, as well as identifying issues of material importance to them.

Annually, the Board receives a report on the results of the Customer Insight Survey

Stakeholder accountability

bankmecu will explore ways for effective dialogue to exist between stakeholders, Board, management and staff. So that all parties can effectively engage on matters relevant to the creation and delivery of customer value and organisation performance.

Strategic planning and performance reporting

Stakeholder views are taken into consideration during bankmecu strategic planning sessions and balanced to ensure long term value creation for bankmecu’s customers. bankmecu’s most recent strategic plan was developed for a five-year period from 2012 to 2017. Performance is transparently reported in the Bank’s Annual Report which is freely available to all stakeholders. There are various channels available to stakeholders to engage on matters relevant to the Bank as outlined above.

Stakeholder engagement activities

The following information is a summary of bankmecu’s major stakeholder engagement activities during 2011/12. Some of the results of these stakeholder engagement activities are discussed throughout this report.

Customers (Shareholders):
  • Annual: Customer Insight Survey
  • Ad hoc: Customer Feedback
  • Ad hoc: Complaints and Compliments Register
  • Ad hoc: Community Forums
Employees:
  • Annual: Annual Organisational Effectiveness (employee attitude) Survey 
  • Monthly: The Managing Director provides monthly Board meeting debriefs to senior and middle management
  • Monthly: The Managing Director provides monthly updates reports to all staff via the intranet
  • Monthly: Footprints Sustainability Reference Group
  • Monthly: Staff Occupational Health and Safety Committee
  • Ad hoc: Intranet feedback (bankmecu’s internal website)
Communities of interest
  • Ad hoc: Community Banking Managers manage relationships within bankmecu’s strategic communities. Each month staff report on community activities and issues relevant to bankmecu’s operations. Relevant information is reported to the CEO and Board each month.
Suppliers
  • Ad hoc: Regular meetings are held throughout the year with major suppliers and on ad hoc basis with contractors.
Regulators and political leaders
  • Ad hoc: bankmecu Directors and management engage in discussions with government representatives in order to stay abreast of emerging relevant economic, social and environmental issues, identify both risks and opportunities for the Company.
Mutual banking sector
  • Ad hoc: Directors and executive management hold positions on a range of mutual financial services industry and community committees and Boards relevant to bankmecu’s operations including: Data Action and CUFA. Management’s sustainability expertise is shared among their respective affiliations.
All Stakeholders
  • Weekly: Website communication and weekly web polling on various topics
  • Quarterly:  Newsletter
  • Annual:  Annual Report and Sustainability Strategy Survey
  • Ad hoc:  Launch of bankmecu
  • Ad hoc:  Launch of bankmecu’s National Lending Centre in Morwell
  • Ad hoc:  Luncheon at bankmecu’s Conservation Landbank in Minimay
  • Ad hoc:  Feedback on bankmecu’s Annual Report via mail@bankmecu.com.au
Australian Population Market research
  • Ad hoc:  EMC customer-owned banking/bankmecu brand and target audience survey

Stewardship of customer wealth

bankmecu will operate with a longer term horizon ensuring its operations are sustainable economically, socially and environmentally both now and into the future.

Sustainability governance

Responsibility for bankmecu’s sustainability strategy resides at all levels of the organisation with sustainability being considered core business by all departments.

The Managing Director and senior management team are responsible for embedding sustainability principles within the business and delivering strategy and leadership, product development, overall management, commercial oversight, stakeholder engagement, community partnerships and communications about sustainability.

The General Manager – Development is responsible for marketing, corporate communications, government relations, facilitating stakeholder engagement and developing community partnerships.

The General Manager – Operations and Risk has oversight of bankmecu’s sustainability risk framework and maintains liaison with UNEP FI.

The General Manager – Development and General Manager – Operations and Risk share liaison with UN GC and UN PRI.

Staff members nominated from each Department participate on a staff sustainability reference group called Footprints. Footprints is responsible for helping to champion and implement appropriate sustainability projects and initiatives across bankmecu. The Footprints team includes a member from senior management. The General Manager – Corporate Services is on rotation to oversee the activities of Footprints. General managers share this responsibility rotating annually.

Footprints is supported by service centre managers to ensure that sustainability initiatives are implemented across the entire organisation and provides an important channel for disseminating information and collecting ideas on how bankmecu can become more sustainable and meet its commitments under UNEP FI, UN PRI, UN GC and bankmecu’s Reconciliation Action Plan.

Staff Charter

The Staff Charter sets out guidelines to help staff understand what is required of them in order to earn the trust and respect of stakeholders and to ensure the Bank strives to fulfil its vision.

Employment with the Bank requires standards of professional behaviour from staff that promote and maintain public confidence and trust in the work of the Bank.

The Staff Charter establishes an ethical framework for the decisions, actions and behaviour of staff. The Charter provides a set of guidelines and rules. It explains the principles covering appropriate conduct in a variety of contexts and outlines the minimum standards of behaviour expected of the Bank’s staff.

Risk management and compliance

bankmecu’s risk management involves creating an organisation and culture that:

  • manages risk within its risk appetite
  • sees risk as the effect of uncertainty on the achievement of objectives
  • recognises risk awareness and risk management as a vital part of doing business
  • identifies risk in all its forms and takes deliberate measures to mitigate the risks where risk evaluation demonstrates the appropriate application of resources to be warranted
  • builds risk management into planning and performance measurement decisions; and
  • operates with a longer-term horizon.

bankmecu does not expect to eliminate all risks, but to minimise and manage exposure based on an informed environment of risk and reward analysis. It considers the management of sustainability as a risk issue.

bankmecu is committed to regulatory compliance and believes compliance is represented by a commitment to:

  • responsible banking
  • good business
  • best practice
  • corporate values; and
  • an investment in bankmecu’s future.

The staff recruitment process seeks a commitment to compliance from prospective employees. As a consequence, compliance forms part of every employee’s position description. bankmecu expects compliant performance from all employees. bankmecu requires appropriate decisive action be taken with staff whose performance wilfully contravenes their compliance responsibilities.

bankmecu recognises that effective risk management and robust compliance can only occur if sound compliance and risk management practice is embedded in responsibilities and performance across the organisation.

Risk assessment

Risk management assessments and assessment reviews are conducted annually and as required. Internally, each department identifies and rates its own risks and determines the appropriate actions to be taken to mitigate them. The Board also undertakes an annual risk assessment process separately.

Internal auditors, Ernst & Young, review bankmecu’s policies, procedures and practices from a risk management perspective and recommend controls or other improvements to mitigate risks.

The Board Audit and Compliance Committee reviews the results of management and audit reports. Action points arising from these processes are monitored and reported on a quarterly basis to the Audit and Compliance Committee.

Risks and opportunities are reflected in bankmecu’s Strategic Plan and addressed in this report.

Risk appetite

bankmecu defines risk appetite as the amount of risk it is willing to accept in pursuit of its objectives.

The Board has identified seven risk categories within which the Executive team and the Bank are allowed to operate and take risks:

  • capital
  • credit
  • operational
  • liquidity
  • profitability and interest margin
  • market; and
  • sustainability risks.

This risk appetite framework sets limits and ensures the Bank’s long term sustainability is achieved with strength, discipline, relevance, accountability, and compliance. Any breach or anticipated breach of these risk appetite limits during the execution of the Company’s strategy must be reported to the Board.

Key risks identified in 2011/12

Global economic risk

The Board reviews progress on a monthly basis towards achieving its strategic plan with information supplied from management and with information obtained externally. Abacus is an industry body which provides regular updates on movements within the industry and industry comparisons.

The Board Finance and Risk Committee meets monthly to review key financial and performance ratios to ensure they remain in accordance with the Board’s guidelines, risk appetite or minimum levels. The committee assesses performance within the Australian economic context and refers to independent economic reports for national and global economic outlook.

Contingency plans are in place to withstand any unexpected outflow of funds or unexpected losses.

Strategic risk and failure to take advantage of opportunities

The Board has established a five-year strategic plan from 2012 to 2017. This strategic plan documents goals and objectives. Many of the objectives in the plan are specific and can be measured by financial outcomes or some form of qualitative assessment.

The plan ensures the flexibility required to meet sudden changes in circumstances. While the vision might remain relatively static, all elements that go to make it up are dynamic and flexible, monitored and reviewed as circumstances change and strategies are brought into play or reviewed, amended, discarded and replaced.

Regulatory risk

bankmecu is committed to a corporate culture of regulatory compliance, recognising this as:

  • good business
  • essential for achieving best practice levels of performance
  • integral to vision and values
  • consistent with responsible banking; and
  • an investment in the Bank’s future

bankmecu requires a compliance commitment from its employees at all levels.

Managers are considered the best placed to have a comprehensive understanding of the compliance regimes impacting on their responsibilities. It considers a comprehensive understanding by responsible managers of their compliance obligations is the best assurance of effective compliance implementation and integral to good management.

Regular training is conducted by staff and competency assessments are conducted to keep staff up to date with the latest regulatory requirements.

The overall compliance system is co-ordinated by the risk management section under the responsibility of the General Manager Operations and Risk.

Internal and external audits and sustainability reporting assurance are independently completed to confirm compliance with legislation. Other self-assessment audit checks are performed by staff to confirm compliance in key areas.

Technology risk

Business continuity plans are established to restore operations as soon as possible after the occurrence of a disaster to minimise the financial, legal, reputational and other material consequences arising from any disruption.

Virtual servers, firewalls and antivirus software are used and regularly updated to prevent unauthorised access to the Bank’s computer network.

Outsourced providers of information technology services are monitored to ensure systems are provided in accordance with agreed service level standards.

Systems are constantly being reviewed and updated to improve products and services for customers.

Major fraud risk

Plastic card fraud is closely monitored and controlled to prevent and mitigate fraud. This year fraud monitoring has been outsourced to specialists in this field to detect and prevent card fraud.

bankmecu has numerous operating systems and controls to detect and prevent fraud.

All staff are required to complete training in understanding internal and external fraud on an annual basis and to communicate bankmecu’s zero tolerance culture in relation to fraud.

Competition from banks and margin squeeze

bankmecu aims to protect its operating margin by managing the interest margin, improving non-interest income and keeping the operating expenses to income ratio within the top quartile of the Australian mutual banking sector.

The Board Finance and Risk Committee meets monthly to review and monitor the Company’s financial, economic, social and environmental performance against budget and targets. This committee also oversees, reviews and monitors the risk management framework, including market risk.

Contagion from underperformance or problems in the mutual sector

bankmecu is committed to operating according to international principles for mutuality and aims to be recognised as the pre-eminent customer-owned bank brand in Australia.

Capital reserves and liquidity reserves have been established well in excess of the minimum requirements.

Contingency plans are in place to withstand any unexpected outflow of funds or unexpected losses.

Merger business risk – increased pressure on resources

bankmecu recognises the contribution economies of scale achieves in maintaining financial ratios consistent with best performance in the mutual banking sector.

Whilst bankmecu wishes to exploit the opportunities provided by its new bank designation to explore organic growth, it will continue to use its established merger skill set to investigate and pursue strategic merger opportunities that are consistent with its strategic objectives.

Board and management recognise the need for information technology systems and other resources to be matched with growth projections.

Any merger projects will be planned and managed to implementation.

Lack of business diversity

bankmecu will implement systematic and balanced business strategies that satisfy the economic, social and environmental performance expectations of its stakeholders now, while protecting, sustaining and enhancing the financial, human and natural resources that will be needed to develop the Bank into the future.

The Board Strategic Plan provides the flexibility required to meet sudden changes in circumstances. While the vision might remain relatively static, all elements that go to make it up are dynamic and flexible and must be monitored and reviewed as circumstances change and strategies are brought into play or reviewed, amended, discarded and replaced.

Lack of knowledge of bankmecu brand

bankmecu aims to continue to develop its broader measures of business progress and market recognition as the pre-eminent customer-owned bank brand in Australia.

bankmecu will:

  • maximise its brand value, marketplace positioning, employee and other stakeholder engagement
  • develop its reputation as a leader in responsible banking
  • assist consumers to make informed decisions about banking
  • maintain customer satisfaction levels above 90 per cent and engage with customers to ensure the Bank reflects their attitudes, values, needs and expectations
  • maintain a Standard & Poor’s rating of at least investment grade,
  • continue to develop effective reporting to its stakeholders; and
  • deliver customer pricing advantage compared to the four major banks.
Hostile takeover risk

bankmecu aims to:

  • deliver enhanced customer share value
  • protect its mutual structure unless a systemic shift occurs in the mutual banking sector
  • control the Bank’s destiny during any hostile takeover or demutualisation attempt on it; and
  • maximise customer benefit in the event of any corporate restructure.

bankmecu’s Constitution requires that the Company may only act on a restructure if 25 percent of members have voted and 75 percent of the members voting have voted in favour of the restructure.

Sustainability risk

bankmecu will be economically, environmentally and socially responsible.

bankmecu aims to achieve sustainable growth at a minimum level that is equivalent to banking system asset growth via organic business, subject to profitability targets by:

  • accessing new target markets
  • building family relationships; and
  • growing existing relationships.

Customer and community benefits will be maximised through a responsible approach to banking, which includes responsibly investing customers’ funds for constructive economic, social and environmental performance.

bankmecu will continue its commitment to keep its direct administrative operations carbon neutral.

Sustainability performance will be independently audited and reported to stakeholders annually.

Key opportunities identified in 2011/12

Key opportunities include:

  • bankmecu’s small size and nimbleness, with the ability to do things that others cannot
  • community sector banking

    -     business in its own right

    -     unlocking acquisition of community sector staff as customers of the Bank

    -     public relations opportunities, creating the impression that bankmecu is bigger.

  • to use the Company’s own language and positioning – differentiation in the cooperative sector ‘customer-owned banking’
  • to redefine consumer segments market (to cut through location and history)
  • to develop customer loyalty management
  • to address social discontent – context for talking about alternative models of enterprise ownership
  • to illustrate the value of customer-owned banking
  • to talk to finance and business media
  • to develop an appropriate and relevant bankmecu owned index / research that reflects the Bank’s purpose and values.

Industry support system

bankmecu provides an extra degree of protection for customers through participation in the CUFSS Limited (CUFFS). CUFSS has been established to protect the interests of members of the organisations participating in the support system and promote financial stability by providing emergency financial support for participants.

These are the participants in the industry support system:

  • Cuscal is a public company limited by shares and owned by mutuals.
  • CUFSS is a public company limited by guarantee, owned by all participants in the industry support system.
  • Mutual ADIs that choose to join the scheme are authorised to conduct the business of banking in Australia under the Banking Act 1959 (Cwth) s9.

Cuscal, CUFSS and all mutual ADIs that are parties to this Industry Support Contract are the participants in the industry support system. The support contract is APRA certified under Banking Act 1959 (Cwth) s11CB.

CUFSS aim is to work together with participants to identify areas of risk and distress and to take a cooperative approach to eliminating those risks.

The purpose of the industry support system is to protect the interests of members of participating mutual ADIs; and promote financial sector stability.

Regulatory compliance

bankmecu is committed to a corporate culture of regulatory compliance, recognising this as:

  • good business
  • essential for achieving best practice levels of performance
  • integral to vision and values
  • consistent with responsible banking, and
  • an investment in the Bank’s future

bankmecu will operate on the basis that the best compliance culture will expect compliance commitment from its employees at all levels. It will expect that managers are the best placed to have a comprehensive understanding of the compliance regimes impacting on their responsibilities. It considers a comprehensive understanding by responsible managers of their compliance obligations is the best assurance of effective compliant implementation.

Regulation and compliance

bankmecu is part of a national framework for prudential regulation of ADIs – including credit unions, building societies, banks and friendly societies – regulated by APRA and operates according to its Prudential Standards. bankmecu uses independent auditors KPMG to conduct an external audit of financial accounts. Audit findings are presented in a report to APRA.

Other principal regulators are the Australian Securities and Investments Commission (ASIC), the Australian Competition and Consumer Commission (ACCC) and the Australian Taxation Office (ATO).

bankmecu complies with all relevant legislation and codes that are in place to protect customers money and personal information. All staff at bankmecu are responsible for compliance with policies, procedures, applicable laws and regulations.

bankmecu has had no incidence of non-compliance with any law or regulatory code of conduct where the complaint was upheld, required reporting to ASIC or other authorities or resulted in court action.

bankmecu did not receive any fines or sanctions for non-compliance with any laws and regulations relating to its business of banking.

bankmecu continued to source all of its supplies in the Australian market through providers who demonstrate ongoing compliance with all relevant Australian laws and regulations. All new tender applications require providers to state any non-compliance. However, it is the onus of the provider to report any breaches as they occur.

Licensing

bankmecu is licensed under the Corporations Act 2001 (Cwth). Under the terms and conditions of the Australian Financial Services Licence (AFSL) (No 238431), bankmecu may deal in or advise on deposit and payment products and general insurance products. bankmecu also holds an Australian Credit Licence to engage in credit activities.

Customer privacy

bankmecu has privacy policies consistent with the Privacy Act 1988 (Cth) and the National Privacy Principles, which provide a clear and concise outline of how and when personal information is collected, stored and distributed by bankmecu.

A Privacy Officer is designated to review complaints concerning possible breaches of privacy relating to the personal information held by bankmecu in respect of a customer. If the complainant is not satisfied with the outcome of the review, the customer can refer their complaint to the Office of the Australian Information Commissioner.

In 2011/12 two customers received statements not intended for them, one as a result of a machine error at bankmecu’s mailhouse, and another due to staff error when a new account was incorrectly linked to another customer who had also opened an account on the same day.

A third party depositing into a customer’s account was provided with a receipt showing the customer’s account balance on two separate occasions by the same staff member. bankmecu apologised for the error and counselled the staff member concerned. This matter has since been referred to the Office of the Australian Information Commissioner and is still being reviewed.

Anti-money laundering

bankmecu complies with Anti-Money Laundering (AML) requirements. On commencing employment, personal banking staff members are trained on how to detect and deal with suspect transactions and they receive annual refresher training.

Anti-bribery and corruption

bankmecu complies with the Australian Standards AS 8001-2003 Fraud and Corruption Control and AS 8004-2003 Whistleblower Protection Programs for Entities.

bankmecu’s Staff Charter contains a section pertaining to gifts and benefits, and states that each employee agrees not to engage in any act that could be interpreted as ‘seeking or receiving a bribe, kickback or questionable payment’.

bankmecu’s Counselling and Performance Policy manages issues any with staff who attempt to mislead or behave dishonestly. Serious misconduct, should it occur, may result in instant termination of employment. No misconduct was identified during the year.

A Whistleblowing Procedure available to staff outlines the steps they might follow in the event they become aware of improper conduct.

Internal fraud and corruption risks are assessed as part of the annual risk review.

All business units assessed their risks relating to corruption this year.

Card fraud

Card fraud continues to be the main source of corrupt practice that has impacted on the Company’s activities.

During the second half of 2011/12 bankmecu launched its 24 hours / 7 days per week card Fraud Bureau Service. This service increased customer card protection and has reduced card fraud losses.

Card Not Present Fraud purchase (telephone and internet) were again the most common form of card fraud during 2011/12.

Counterfeit cards accounted for the highest losses in 2011/12. Over the past three years the number of data compromises in Australia has increased almost tenfold. Australia currently accounts for 10 per cent of the global data compromise figures and some 80 per cent of the Asia Pacific, Central Europe, Middle East and Africa totals.

bankmecu continues to provide training and guidelines to staff and customers on fraud awareness.

bankmecu has participated in public awareness campaigns which further educate customers around key fraud related issues.

Statistics about fraud 
Reported in 2011/12 No. of customers Value
(AUD)
Card not received 3 1,029
Fraudulent use of card number 259 115,551
Lost card 2 2,976
Stolen card 22 14,068
rediCard 3 1,696
Counterfeit / skimmed 121 253,959
Total 410 389,280

Competition and pricing

bankmecu meets all the requirements of the Trade Practices Act 1974 (Cwth) as it relates to anti-competitive behaviour. bankmecu is also aware and supportive of the Australian Competition and Consumer Commission (ACCC) Guidelines on green marketing and carbon disclosure.

Product information and labelling

bankmecu complies with the ASIC principles of good disclosure and with all other regulatory requirements relating to the promotion and sale of financial services and products.

 

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