An overhaul of the board of directors of ME Bank is in the works, as restless shareholders seek to reform the governance of the bank.
Leading lights among the 26 industry superannuation funds that own the bank are rallying to seek the replacement of a number of the seven directors on the board of Members Equity Bank Limited.
The funds have learned that the ME board – which will be meeting on Thursday – has not held any meeting since the reputation crisis around the handling of limits on redraws on mortgages unfolded from late April. Industry fund sources confirmed this aspect of the recent supervision of the bank’s affairs with Banking Day.
One ME director, Elana Rubin has resigned, and will sever her ties with the bank at the end of this week’s board meeting. Rubin is taking up the role of chair of Afterpay.
Of the other six directors, three are relatively recent appointments to the board including the bank’s chair Jim Evans, who joined the bank directly in the role of chair in April 2019. He replaced Ken Hodgson.
Speculation is building that Evans is vulnerable. The activist funds are dissatisfied with the ME board’s decision-making, as the legal and commercial dilemmas underlying the redraw fracas were examined by the board and management and advisers from late 2019.
The devil in the detail on who did what and when - and what the bank’s battered CEO, Jamie McPhee, did or did not say as the row escalated in May - is drawing ME once more into the spotlight of the House Economics Committee, chaired by the hostile Liberal MP Tim Wilson.
The AFR yesterday published a long article framed around alleged contradictions voiced by James Shipton, the ASIC chair, in a letter to Wilson’s committee late last week.
The AFR reported that, in the ASIC analysis, Jamie McPhee’s evidence to the Economics Committee “did not fully reflect the extent of ME Bank’s communication with ASIC”.
Shipton’s letter stated that “ASIC has raised this inconsistency in Mr McPhee’s statements with ME Bank, and understands that ME Bank intends to correct the record in their responses to further questions the committee has raised with ME Bank directly.”
According to the AFR the Economics Committee has scheduled a hearing for tomorrow and has recalled ME Bank to appear. As of this morning, however, the committee’s website did not list any hearing as part of its inquiry into the Superannuation Sector.
Jim Evans served five years as Chief Risk Officer for Wealth Management at Commonwealth Bank in the 2000s, though his direct management experience in banking is limited. Evans is also the chair of ASX-listed Pendal Group.
As previously reported in Banking Day, ownership of the humiliating choices on the handling of the redraw matter lies squarely with the conservative ME board.
The bank’s management and above all the CEO Jamie McPhee (the only ME identity chastised in the media) consistently stood up to their directors over the PR implications of blind-siding mortgage customers over their redraw rights, or so Banking Day has heard from multiple industry sources.
McPhee advised his board that that redraw restrictions may prove a franchise-destroying move.
The activists among the Industry Super funds are said to believe that the ME board has not taken responsibility for the flawed change on redraws that took effect on 27 April only to be reversed on 8 May.
The bank’s muddled communication looks a function of the fact that senior management were not invested in the decision.
Banking Day revealed last week that the decision to restrict redraw activity among home borrowers actually backfired, with recent investor reports showing ME's mortgage securitisation programs suffered a blowout in redraw activity in May.