Gail Kelly was a dud and other mysteries
So Westpac's Gail Kelly, potentially the $55 million CEO according to the latest beneficent offer from her board, was a dud CEO at St George. Or the Australian Competition and Consumer Commission's Graeme Samuel is a fool. You choose the correct statement and disregard the other.
Those alternatives were (perhaps unintentionally) proposed in yesterday's Chanticleer column in the Australian Financial Review, which claimed St George could not have survived the global financial crisis as an independent entity as it “was too heavily exposed to the securitisation market”. According to Chanticleer and general market opinion, that's why Samuel waved through Westpac's acquisition of St George in 2008.
If the Westpac takeover didn't have to happen – if it wasn't another case of the regulators and bank club quietly engineering the solution to a crisis – Samuel has to be marked as a failure. That takeover remains the biggest single reduction in banking competition since the big four emerged from Large Six-and-a-few-bits. The current grandstanding about competition in banking is nonsense by comparison – mere Movember bum fluff.
Alternatively, the St George that allegedly would have failed without Westpac's rescue was Kelly's St George – there had been no substantial change at the bank since Kelly hit the jackpot when Westpac purchased her in 2007. Under the Chanticleer scenario, instead of being hailed as one of the world's most powerful women, Kelly was on track to being reviled as a complete disaster – the woman who ran St George on an unsustainable basis and thus into failure when global winds blew cold.
The CEOs and boards of failed and/or bailed banks in Europe and the US aren't regarded as particularly smart individuals. They stuffed up very big time and caused enormous pain and suffering. The idea that Australia had a couple of banks that were only saved from such a fate by official and unofficial intervention has interesting implications.
Take Suncorp – ANZ nearly did. It's generally understood that the Brisbane-headquartered financier of choice for many a property developer was at the altar with ANZ in order to save itself when the Federal Government interrupted proceedings with its offer of explicitly guaranteeing Australian funding. The wedding was cancelled, the bride instead running off to reconstruct itself under Canberra's protection.
But if the background story holds true, if Suncorp was about to fail unless taken over or government guaranteed, how have the chairman and fellow long-serving directors kept their jobs? The concept of being held responsible doesn't seem to penetrate our boardrooms – that's best left to small fry who can't afford flash lawyers.
The Chanticleer scenario could lead to an interesting re-write of history. Aside from a prominent CEO and a couple of boards not actually being good at their jobs, running their banks too close to the wind, it also would mean that our key watchdogs – APRA and the RBA – aren't the world champions they've appeared to be. What would the verdict be on APRA if most of the banking below the Big Four and above the credit unions had been shown to be unsustainable?
Maybe that would explain why APRA has been much more bolshie of late, writing directly to bank boards rather than management, cracking whips over various ratios it had previously ignored, individually interviewing directors of deposit-taking institutions. APRA too might have dodged a very embarrassing bullet.
But life, banking and financial systems are full of mysteries and unknowns – like the Reserve Bank rather pointedly changing its tune in yesterday's board minutes about the banks increasing rates by more than the cash rate movement. Again, it's only hypothetical, but maybe the board had had enough of the Canberra's political nonsense.
And those RBA minutes, gee, they would be revised after the meeting, would they? No, the RBA board must just be amazingly prescient.
Michael Pascoe is a BusinessDay contributing editor and, by way of disclosure, of course the Pascoe family super fund holds bank shares, including Westpac.