Judo Bank and AMP Bank director John Fraser
Police & Nurses Bank board member Julie Elliott says she has disclosed her involvement in a new banking startup to P&N’s chairman Paul Gabb and her fellow directors, but will stay in her role at the Perth bank for the time being.
Elliott is also a director of Melbourne-based financial services company, Asia Pacific Capital Limited(APCL), which has lodged a bank licence application with APRA.
When asked by Banking Day yesterday whether she might be exposed to a material conflict of interest holding both directorships, Elliott said the P&N and APCL boards had determined she was not conflicted.
Elliott is heavily involved in progressing the licence application as an executive director of APCL and is believed the most likely person to be appointed chief executive if the Melbourne startup secures authorisation to operate as a bank.
Elliott indicated she would resign from the P&N board if fellow directors decided she had a conflict.
“I have declared my involvement to P&N and APCL - both boards have decided at this stage given the operations of both there is no conflict of interest,” she said in an email.
“If this changes of course I will resign.”
Historically, Australian prudential regulators have blocked attempts by directors to sit on more than one bank board.
However, APRA appears to have loosened the restriction in recent years by allowing Judo Bank director John Fraser to also sit on the AMP Bank board.
Fraser retains both directorships even though Judo and AMP Bank compete against each other in the Australian retail deposits market.
Judo last year intensified its rivalry with AMP Bank in the strategically critical retail deposits market after it sweetened rate offers to customers.
In response to questions from Banking Day in June last year, APRA confirmed that it did not expressly prohibit a director from sitting on more than one bank board.
"APRA's prudential standards do not expressly prohibit directors sitting on boards of more than one authorised deposit-taking institution at a time, but it is rare," a spokesperson for the regulator said.
"APRA is mindful that such a situation can create risks, including the potential for conflicts of interest, that need to be identified and appropriately managed.”
ASIC also elected not to take action against AMP Bank even though a transcript of the 2019 AMP annual meeting shows that neither Fraser nor chairman David Murray disclosed to shareholders that his duties as a company director also extended to a potential competitor of AMP Bank.
Corporate governance expert Helen Bird from Swinburne University said APRA had the power to block the appointment of a conflicted director by applying a fit and proper test.
"While APRA does not preclude a person from sitting on two boards in its guidance standards, the overriding consideration for dealing with such a conflict would be the Corporations Act and the responsibilities and duties it prescribes for directors,” she said.
"APRA does have the means to block an appointment to a bank board because it has to make judgements about whether such a person meets a fit and proper test."
"Conflicts of interest would be a consideration in determining whether a person is fit and proper."
Bird said the moment that a licence application was approved by the regulator would be the ideal time for a director to step back from a conflict .
"If there's a shared set of customers or targeted customers between the two banks then it’s quite likely there would be conflict,” she said.
"It’s important that directors demonstrate awareness of the potential conflict and take steps to manage it. The important thing is to declare the conflict and not engage in decision making where the conflict arises.”