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2022 | OriginalPaper | Buchkapitel

36. Board Committees

verfasst von : Francesco de Zwart

Erschienen in: The Key Code and Advanced Handbook for the Governance and Supervision of Banks in Australia

Verlag: Springer Nature Singapore

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Abstract

Chapter 36 of this Stage 2 Key Code and Advanced Handbook examines board committees.

This begins with the Audit Committee with a review of Audit Committee variables from Stage 1 including a review of the [AudCom] (+) variable relational effect path from Stage 1 with a coverage/rating of +6/75.00 rprox. We then examine the ASX’s safeguarding of the integrity of corporate reports and the APRA Prudential Standard 510 on the Board Audit Committee. There follows the requirements of the BCBS Audit Committee and NAB Self-Assessment 2018.

We then move to the APRA shortcomings in the operation of the audit committee, ‘red’ audit reports failings in audit committee practice, APRA audit committee reporting weaknesses and reliance on key individuals and conclude with the Westpac audit committee reporting from group audit.

Other committees examined include the Board Risk Committee (BRC), Compensation/Remuneration Committee and other committees including the Nomination and Governance Committee, the Ethics, Compliance and Reputation Committee and NAB’s Customer Outcomes Committee.

The examination then turns to consider APRA’s failings in board committees including failings in communication between board committees, failings in the candour of messaging to the board and its committees, over-confidence and lack of benchmarking.

There follows APRA’s failings in senior executive leadership giving rise to a Non-Financial Risk Committee (NFRCm) and examining the Executive Committee and Non-Financial Risk Committee. We conclude with APRA’s improvements in non-financial risk management in relation to operational, compliance and conduct risks (NFRMan) and APRA’s observations that acknowledged weaknesses are already known (NFRWeak).

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Vorheriges Kapitel Size and Composition of the Board

Nächstes Kapitel Complexity of Bank Structures, Off-Balance Sheet Entities, Disclosure and Transparency

The Bank for International Settlements, The Basel Committee on Banking Supervision, Guidelines, Corporate Governance Principles for Banks, July 2015, accessed 21 March 2017 at http://www.bis.org/bcbs/publ/d328.htm, (‘BCBS Guidelines 2015’), Para 67, p 16.

Francesco de Zwart, Enhancing Firm Sustainability Through Governance, The Relational Corporate Governance Approach, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing, Corporations, Globalisation and the Law Series, July 2015, (‘Stage 1’).

For Stage 1, see also, Francesco de Zwart, “Enhancing firm sustainability through governance – Part 1: The challenge of corporate governance” (2018) 33(2) Aust Jnl of Corp Law 144 and Francesco de Zwart, “Enhancing firm sustainability through governance – Part 2: The framework of the relational corporate governance approach” (2019) 34(1) Aust Jnl of Corp Law 27.

Audit Committee - Presence, Operation and Frequency.

Corporate Governance and Legal Compliance – see sect. 2.6.2 of chap. 2, Stage 1, above n 2.

Risk Management, Internal and External/Audit Monitoring Quality – see discussion in sect. 2.6.5 of chap. 2, Stage 1, above n 2.

Quality of Board, CEO and Management Decision-making – see discussion in sect. 2.6.7 of chap. 2, Stage 1, above n 2.

Transparency, Timing and Integrity of Financial and Other Reports – see discussion in sect. 2.6.1 of chap. 2, Stage 1, above n 2.

Alignment of Management and Shareholder Interests – see discussion in sect. 2.6.3 of chap. 2, Stage 1, above n 2.

Board, CEO and Management Compensation and Incentives – see discussion in sect. 2.6.4 of chap. 2, Stage 1, above n 2.

Board Independent Director: Executive Director Proportion – Monitoring Effect. See discussion in sections 7.3.2.1.1–2 of chap. 7, Stage 1, above n 2.

Australian Securities Exchange, ASX Corporate Governance Council, Corporate Governance Principles and Recommendations, Fourth Edition, February 2019, accessed 10 April 2020, available at https://www.asx.com.au/documents/regulation/cgc-principles-and-recommendations-fourth-edn.pdf (‘2019ASX’).

Ibid, Rec 4.1(a)(1), p 19.

Ibid.

Ibid, Rec 4.1(a)(2).

Ibid, Rec 4.1(a)(3).

Ibid, Rec 4.1(a)(4).

Ibid, Rec 4.1(a)(5).

Ibid.

Ibid, Commentary to Rec 4.1, p 19.

Ibid, p 20.

Ibid.

Ibid, Rec 4.2, p 20.

Ibid.

Ibid, Rec 4.3, p 20.

Australian Prudential Regulation Authority, Prudential Standard CPS 510 Governance, July 2019, accessed 22 September 2019, available at:

https://www.legislation.gov.au/Details/F2019L00662/Download (‘CPS 510’), sections 73–89, pp. 17–19.

Ibid, section 73, p 17.

Ibid, section 74, p 17.

Ibid, section 75, p 17.

Ibid.

Ibid, section 76, p 17.

Ibid, section 77, p 17.

Ibid, sections 78(a)-(e), p 18.

Ibid, section 79, p 18.

Ibid, section 80, p 18.

Ibid, section 82, p 18.

Ibid.

Ibid, section 83, p 18.

Ibid, section 84, p 18.

Ibid, section 85, pp. 18–19.

Ibid.

Ibid, section 86, p 19.

Ibid, section 87, p 19.

Ibid, section 88, p 19.

Ibid, section 90, p 19.

Ibid, section 91, p 19.

Ibid.

BCBS Guidelines 2015, above n 1, Para 68, p 16.

Ibid, Para 69, pp. 16–17 (footnote omitted).

National Australia Bank, NAB Self-Assessment on Governance, Accountability and Culture, November 2018, accessed 15 March 2019, available at https://www.nab.com.au/content/dam/nabrwd/documents/reports/corporate/nab-self-assessment-2018.pdf (‘NAB Self-Assessment 2018’).

Ibid, p12.

CPS 510, above n 26, sections 92–100, pp. 19–21.

Australian Prudential Regulation Authority (APRA), Prudential Inquiry into the Commonwealth Bank of Australia, Final Report, 30 April 2018, (‘APRA Final Report’), accessed 1 June 2018 at www.apra.gov.au/AboutAPRA/.../CBA-Prudential-Inquiry_Final-Report_30042018.pdf, p 15.

Ibid.

See discussion in sect. 9.1.2.1 of Stage 1, above n 2, pp. 198–199.

APRA Final Report, above n 54, p 15.

Banks – Board Oversight of Risk Management – Failure to Escalate Problems or Red Flags – Reduction in Quality of Risk Management and Internal Monitoring and Decision-making - Reduction in Quality of Accountability/Responsibility, coverage/rating − 8/100.00 rprox. See discussion in Sect. 38.6 below.

See discussion in section 9.1.2.1 of Stage 1, above n 2, pp. 198–199.

APRA Final Report, above n 54, p 17.

Westpac Banking Corporation, Review Team, Governance, Accountability and Culture Self-Assessment, 28 November 2018, accessed 5 August 2019, available at https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/media/Westpac_Self-Assessment_Report_pdf (‘Westpac Review Team 2018’), sections 5.2.19–5.2.22, p 35.

See discussion in section 9.1.2.1 of Stage 1, above n 2, pp. 198–199.

Westpac Review Team 2018, above n 62, section 5.2.21, p 35.

Ibid.

Ibid, section 5.2.22 and Recommendation G4, p 35.

BCBS Guidelines 2015, above n 1, Para 77, p 18.

NAB Self-Assessment 2018, above n 51.

Ibid, p 12.

2019ASX, above n 11.

Ibid, Rec 2.1(a)(1), p 12.

Ibid, Rec 2.1(a)(2), p 12.

Ibid, Rec 2.1(a)(3), p12.

Ibid, Rec 2.1(a)(4), p 12.

Ibid, Rec 2.1(a)(5), p 12.

Ibid, Commentary to Rec 2.1, p 12.

Ibid, pp. 12–13.

BCBS Guidelines 2015, above n 1, Para 77, p 18.

NAB Self-Assessment 2018, above n 51, p 13.

See discussion in sect. 2.6.2 of Stage 1, above n 2, pp. 41–43.

NAB Self-Assessment 2018, above n 51, section 2.3.2, p 13.

Ibid.

See discussion in sections 7.3.2.1.1–7.3.2.1.2 of Stage 1, above n 2, pp. 208–212.

See discussion in sect. 2.6.2 of Stage 1, above n 2, pp. 41–43.

Westpac Review Team 2018, above n 62, section 5.6, p 39.

Ibid, section 5.6.1, Figure 5B, p 39.

Ibid, section 5.6.2, p 39.

Ibid, section 5.6.3, p 39.

Ibid, Recommendation G10, p 39.

APRA Final Report, above n 54, section 2.2.4, p 19.

Ibid.

See discussion in sect. 9.1.2.1 of Stage 1, above n 2, pp. 198–199.

APRA Final Report, above n 54, section 2.2.4, p 19.

Ibid.

Ibid.

Ibid.

Ibid.

See discussion in sect. 9.1.2.1 of Stage 1, above n 2, pp. 198–199.

104

APRA Final Report, above n 54, section 2.2.4, p 19.

105

Ibid.

106

NAB Self-Assessment 2018, above n 51.

107

See discussion in sect. 9.1.2.1 of Stage 1, above n 2, pp. 198–199.

108

NAB Self-Assessment 2018, above n 51, p 13

Ibid.

Ibid.

Ibid.

Ibid.

APRA Final Report, above n 54, section 2.2.4, p 19.

114

115

See discussion in sect. 9.1.2.1 of Stage 1, above n 2, pp. 198–199.

116

APRA Final Report, above n 54, section 2.2.5, p 19.

117

Ibid.

118

Ibid.

119

See discussion in sect. 9.1.2.1 of Stage 1, above n 2, pp. 198–199.

120

APRA Final Report, above n 54, section 2.2.6, p 20.

121

Ibid, section 2.2.7, p 20.

122

123

See discussion in sect. 9.1.2.1 of Stage 1, above n 2, pp. 198–199.

124

APRA Final Report, above n 54, section 2.2.6, p 20.

125

Ibid.

126

Ibid, section 2.2.7, p 20.

127

Ibid.

128

See discussion in section 9.1.2.1 of Stage 1, above n 2, pp. 198–199.

129

APRA Final Report, above n 54, section 2.2.7, p 20.

Ibid.

Ibid.

Ibid.

Ibid, section 3, 3.1 Background, p 22.

134

Ibid, section 3.2.1 Operation of the Executive Committee, p 23.

135

Ibid, pp. 23–24.

136

137

See discussion in section 9.1.2.1 of Stage 1, above n 2, pp. 198–199.

138

APRA Final Report, above n 54, section 3.2.1 Operation of the Executive Committee, p 23.

Ibid.

Ibid, p 24.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid, Recommendation 8, p 26.

147

148

See discussion in sect. 9.1.2.1 of Stage 1, above n 2, pp. 198–199.

149

APRA Final Report, above n 54, p 25.

Ibid.

Ibid.

Ibid.

Ibid, pp. 25–26.

Ibid, p 26.

Ibid.

Australian Prudential Regulation Authority (APRA), Information Paper, Self-Assessments of Governance, Accountability and Culture, 22 May 2019, accessed 5 June 2019, available at https://www.apra.gov.au/sites/default/files/information_paper_self-assessment_of_governance_accountability_and_culture.pdf, (APRA Information Paper 2019′), p 15.

157

158

See discussion in sect. 9.1.2.1 of Stage 1, above n 2, pp. 198–199.

159

APRA Information Paper 2019, above n 156, p 15.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid, p 16.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

See discussion in sect. 9.1.2.1 of Stage 1, above n 2, pp. 198–199.

181

APRA Information Paper 2019, above n 156, pp. 20–21.

Ibid, p 20.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid.

Ibid, p 21.

Titel: Board Committees
verfasst von: Francesco de Zwart
Verlag: Springer Nature Singapore
Buch: The Key Code and Advanced Handbook for the Governance and Supervision of Banks in Australia
Print ISBN: 978-981-16-1709-6

Electronic ISBN: 978-981-16-1710-2

Copyright-Jahr: 2022
DOI: https://doi.org/10.1007/978-981-16-1710-2_36

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