Customer accountability and participation

Key Highlights

Goal four: excellence in governance

Governance - Overview

Competent well-qualified leadership

The majority of the Board of Directors are elected by customers on a rotating basis for a three-year term. Five non-executive Directors are customer-owner elected and independent. Three are appointed by the Board of which two are independent. There is one executive Director – the Managing Director. The Chair of the Board of Directors is independent and not an executive officer.

The Board has adopted a formal renewal program to ensure there is at all times an appropriate level of expertise on the Board as well as diversity, commercial experience, and fresh perspective. The renewal program recognises the importance of ensuring the history, values and culture of the organisation are preserved and built upon.

The collective remuneration for the Board (as approved by customers at the 2012 AGM) is $523,000 per annum pro rata. This sum represents total Board remuneration for all seven non-executive Directors including fees, concessions and other benefits as well as all relevant taxes payable by the Bank and Directors.

Productive democracy

As a mutually owned financial services organisation, bankmecu operates for the benefit of its customers under the ultimate governance of its customers who own the bank. Customer views were heard during the AGM process, through customer research and feedback processes.

Stewardship of customer wealth

bankmecu recognises risk awareness and risk management as a vital part of doing business and creating customer value. The Bank does not expect to eliminate all risks, but to minimise and manage exposure based on an effective risk and reward analysis.

Risk management assessments and 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. bankmecu maintains a risk register for recording and monitoring risk.

The top 10 risks identified in 2012/13:

  • technology risk
  • contagion from underperformance or problems in the finance sector
  • credit risk
  • strategic risk and failure to take advantage of opportunities
  • competition from banks and margin squeeze
  • lack of business diversity
  • global economic risk
  • not making full use of our existing relationships
  • lender’s mortgage insurer failure
  • major fraud.

Regulatory compliance

bankmecu is regulated by the Australian Prudential Regulation Authority (APRA) as an Authorised Deposit-taking Institution (ADI) under the prudential standards demanded of all banks, credit unions, building societies and friendly societies. Other principal regulators are the Australian Securities and Investments Commission (ASIC), the Australian Competition and Consumer Commission (ACCC) and the Australian Taxation Office (ATO).

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 fulfils its vision. 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, resulted in court action or receiving a fine.

Card fraud significantly decreased by 45.94% ($210,406) in 2012/13 as a result of sustained efforts from VISA, merchants, and law enforcement agencies. bankmecu’s move to 24/7 card fraud monitoring with Cuscal, chip card technology and the extensive use of PINs have also reduced counterfeit fraud.

Fraud via telephone and the Internet were again the most common forms of card fraud and accounted for the highest losses.

During 2012/13 we suffered a Phishing attack resulting in customers and non-customers receiving an email purporting to be from bankmecu. This email requested customers to input personal details such as card details, passcodes and mobile numbers, etc. As a result we suffered a total loss of $136,188 from 38 reported cases.

Lending fraud attempts also increased during 2012/13 to a total of 33 cases ($3,229,673). These fraud attempts ranged from falsified supporting documentation, undisclosed liabilities, false identification and identification takeovers.

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Governance - In depth

Competent well qualified leadership

bankmecu will maintain a level of competence and expertise required 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

The Bank 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. One new Director was elected by customers to the Board of Directors at the 2012 Annual General Meeting (AGM).

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 his 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 elected and independent. Three are appointed by the Board of which two are independent. There is one executive Director – the Managing Director. The Chair of the Board of Directors is independent and not an executive officer.

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.

The bankmecu Fit and Proper Policy and the Governance Policy both outline processes to ensure an appropriate level of expertise on the Board. This expertise is needed for guiding the Bank’s strategic direction:

  • a three-year Director election cycle provides the customer base with a democratic process for assessing suitable Directors and seeking renewal on the Board
  • a Nominations Committee interviews Director candidates to assess their fitness and propriety for being a Director. This includes probity checks and an evaluation of required skills and expertise
  • an annual review of Board and Director performance including individual, peer and executive management 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 the Bank

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 review in 2013. That Review was based on the Board Dimensions methodology developed by Cameronralph Navigator.

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 committee

As at 30 June 2013, the following Committees advised the Board:

Risk (meets monthly).

  • Greg Camm (Director and Committee Chair)
  • Peter Taylor (Director)
  • Melissa Bastian (Director)
  • Damien Walsh (Managing Director)
  • Robert Allen (General Manager Operations and Risk)
  • Chris Newey (General Manager Corporate Services)

The Risk Committee oversees and reports to the Board on the management of risks (capital risk, credit risk, operational risk, liquidity risk, profitability and interest margin risk, market and sustainability 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).

  • Judith Downes (Director and Committee Chair)
  • Helen Clarke (Board Deputy Chair and Director)
  • Peter Ford (Director)
  • Peter Taylor (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 and Board policies. It provides advice and recommendations to the Board on matters relating to its responsibilities for ensuring that the Bank’s values and stakeholder expectations are reflected in its policies and practices, in the areas of financial, social and environmental impact and business ethics.

Governance (meets quarterly).

  • Helen Clarke (Board Deputy Chair and Committee Chair)
  • Peter Ford (Director
  • Melissa Bastian (Director)
  • Damien Walsh (Managing Director)

The Governance 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 Chair and Committee Chair)
  • Helen Clarke (Board Deputy Chair)
  • 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)
  • John Baistow (Board Chair)
  • Helen Clarke (Board Deputy Chair)
  • Greg Camm (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 on mergers, demutualisation and takeovers.

Nominations (meets as required).

  • Appointed consultant (Committee Chair)
  • Appointed consultant
  • Helen Clarke (Board Deputy Chair)

The Nominations Committee provides advice to the Board and customer in accordance with policies and the Constitution 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.

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

Director remuneration

The total amount of remuneration for Directors is determined annually at the Annual General Meeting.

A recommendation is put forward by the Governance Committee for customer owner vote. Total remuneration last voted upon by customer owners at the 2012 AGM was for the total sum of $523,000 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.

Approval of the Managing Director’s compensation and benefits is the responsibility of the Board.

Employee remuneration.

Operational structure

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 day-to-day leadership and management of the Bank.

The Managing Director is supported by a senior management team that meets formally fortnightly and oversees the day-to-day management of the Bank.

Organisational and management structure

Policies and practices

The precautionary approach is embedded in all policies, procedures and our prudential, socially responsible conduct.

bankmecu has Board policies to guide management as follows:

  • Anti Money Laundering and Counter Terrorism Financing Policy
  • Associations with Related Entities Risk Management Policy
  • Capital Policy
  • Collective Provision Methodology Policy
  • Communications Policy
  • Complaint and Dispute Resolution Policy
  • Compliance Policy
  • Credit Card Risk Management Policy
  • Credit Integrity Policy
  • Customer Ownership Policy
  • Dormant Customers and Unclaimed Monies Policy
  • Environmental Policy
  • Finance and Accounting Policy
  • Fit and Proper Policy
  • Fraud Control Policy
  • Governance Policy
  • Human Resource Management Policy
  • Large Exposure Policy
  • Lending Policy
  • Liquidity Contingency Policy
  • Liquidity Risk Management Policy
  • Market Risk Management Policy
  • Merger Demutualisation Takeover Policy
  • Outsourcing Policy
  • Privacy Policy
  • Public Disclosure Policy
  • Remuneration Policy
  • Research and Benefits Policy
  • Responsible Investment and Lending Policy
  • Risk Appetite Statement
  • Risk Management Policy
  • Securitisation

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 the intranet and through staff training.

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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.

Customer engagement

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

The Stakeholder Engagement Policy provides a framework for the management of customer engagement processes.

bankmecu provides the opportunity for customers to respond to a Customer Insights Survey annually, as well as participate in a number of stakeholder activities.

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
  • calling a Special General Meeting

The Board receives reports detailing information on the range of stakeholder engagement activities involving customers. It is also committed to engaging with customers and stakeholders at events held for the purpose of learning about their needs and expectations, as well as identifying issues of material importance to them.

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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 strategic planning sessions and balanced to ensure long-term value creation for customers. Performance is transparently reported in the Bank’s Corporate Report which is freely available to all stakeholders.

Stakeholder engagement activities

Our Stakeholder Engagement Policy provides a framework for the management of the 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 following information is a summary of bankmecu’s major stakeholder engagement activities during 2012/13.

Customers (Shareholders):

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 Development Managers manage relationships within our strategic communities. Each month staff report on community activities and issues relevant to operations. Relevant information is reported to the Managing Director and Board each month.

Suppliers

  • Ad hoc: Regular meetings are held throughout the year with major suppliers and on an ad hoc basis with contractors.

Regulators and political leaders

  • Ad hoc: Directors and management engage in discussions with a range of government representatives in order to stay abreast of emerging relevant economic, social and environmental issues, as well as identify both risks and opportunities for the Bank.

Mutual banking sector

  • Ad hoc: Directors and 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 CUFSS. Management’s sustainability expertise is shared among their respective affiliations.

All Stakeholders

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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 the 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 and media relations, facilitating stakeholder engagement and developing community partnerships.

The General Manager Operations and Risk has oversight of the sustainability risk framework and maintains liaison with UNEP FI and the IIRC.

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 the Bank. The Footprints team includes a member from senior management 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. It 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 our 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 fulfils its vision.

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

Our risk management involves creating an organisation and culture that:

  • manages risk within the Bank’s 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

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

Compliance forms part of every employee’s position description. The Bank expects compliant performance from all employees and requires appropriate decisive action be taken with staff whose performance wilfully contravenes compliance responsibilities.

We recognise 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 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 our 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 the 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
  • 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 Bank’s strategy must be reported to the Board.

Internal audit – Responsible Banking

In accordance with the 2013 Internal Audit Plan, Ernst & Young performed an assessment of the control environment supporting our responsible banking commitments. The internal audit tested the Environmental Management System, our responsible banking branding and our publicly contracted sustainability commitments, which support the credibility and execution of the Bank’s responsible banking commitments. The audit identified potential inherent business risks and opportunities for improvement. The audit included site visits to various service centres to test customer service consistency.

Key risks identified in 2012/2013

This section outlines the top 10 risks identified by bankmecu in 2012/13 and how the Bank manages them. 

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, reputation and other material consequences arising from any disruption.

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

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

Data protection and confidentiality controls are implemented for the protection of all computer data and software systems.

Contagion from underperformance or problems in the finance sector risk

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 prudential requirements.

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

Credit risk

Credit risk is the risk of financial loss if a customer fails to meet contractual obligations to repay a debt, and arises principally from loans and advances to customers.

bankmecu has an excellent record of minimising loan write-offs. However, lending is the major part of our business and has the potential to be a significant risk in difficult economic times.

We are committed to prudent lending in accordance with lending policy criteria, legislation and prudential standards to ensure that customers have the capacity to repay loans.

Natural disasters such as fires and floods, declining property prices, adverse economic conditions and unemployment are examples of situations which result in customers being unable to repay loans. Customers in hardship situations are assisted wherever possible to facilitate loan repayments. 

The loan portfolio is constantly monitored for impaired loans and appropriate provisions and reserves are established for loans which are considered uncollectible.

Strategic risk and failure to take advantage of opportunities

The Board has established a five-year strategic plan from 2013 to 2018. 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 Bank’s vision remains consistent, all elements that go to achieve it are dynamic and flexible, monitored and reviewed as circumstances change and strategies are brought into play or reviewed, amended, discarded and replaced.

Competition from banks and margin squeeze risk

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

Lack of business diversity risk

The Bank actively monitors the mutual sector for opportunities to introduce and improve products and services for customers. The Bank also actively monitors the mutual sector for strategic consolidation opportunities that will increase its scale.

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. COBA is an industry body which provides regular updates on movements within the industry and industry comparisons.

The Board 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 limits. The committee assesses performance within the Australian economic context and refers to independent economic reports for the national and global economic outlook.

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

Not making full use of our existing relationships risk

A Development Plan has been established to address the opportunity to conduct more business with existing customers. The Bank’s fee policy seeks to ensure that the level of our fees and charges offers an incentive for customers to conduct more of their business with it.

bankmecu aims to demonstrate its stewardship of the material wealth of the Bank by delivering enhanced customer share value.

Lender’s mortgage insurer failure risk

Lenders mortgage insurers have been adversely affected by the Global Financial Crisis. In addition, natural disasters, unemployment and declining house prices could add to financial pressure for lenders mortgage insurers.

bankmecu monitors the health of the lenders mortgage insurers via credit rating agency reports and offers the most appropriate insurers for customers.

Major fraud risk

Card fraud is closely monitored and controlled to prevent and mitigate fraud.

We have numerous operating systems and controls to detect and prevent fraud. If any significant fraud occurs, it is investigated in detail with the aim of implementing additional controls to mitigate any potential future losses.

Fraud monitoring has also been outsourced to specialists in this field to detect and prevent card fraud.

All staff are required to complete training in understanding internal and external fraud on an annual basis and managers implement and communicate our zero tolerance culture.

Key opportunities identified in 2012/13

Key strategic opportunities identified through materiality assessment include:

  • The current social discontent around the role of business provides the context for talking about alternative models of enterprise ownership and responsible use of customer funds.
  • As a bank, we have the opportunity to further promote the value of the customer owned banking model and differentiate ourselves in the marketplace.
  • Leveraging on last year’s United Nations International Year of Cooperatives, bankmecu can further promote the importance of the cooperative business model with other cooperatives.
  • Through our involvement in the IIRC pilot program, we have the opportunity to better communicate the value of customer owned banking with the aim of attracting new customers and retaining exisiting ones.
  • Through established networks, bankmecu has the opportunity to increase banking in the community sector through workplace banking promotion.
  • bankmecu has the opportunity to retain and grow product usage and its customers through more effective marketing.
  • Our size provides the opportunity to be nimble and implement new ideas that others cannot so easily act upon.
  • The merger between bankmecu and Fitzroy & Carlton Community Credit Cooperative Limited (FCCC) provides an opportunity to build on FCCC’s legacy of working with financially excluded people.
  • Renewable energy installation and/or finance provision.

Industry support system

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

Participants in the industry support system include:

  • Cuscal - a public company limited by shares and owned by mutuals ADIs
  • CUFSS - 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

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 in their business and to take a cooperative approach to eliminating those risks.

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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
  • an investment in the Bank’s future

The Bank operates on the basis that the best compliance culture will expect compliance commitment from its employees at all levels. We expect that managers are the best placed to have a comprehensive understanding of the compliance regimes impacting on their responsibilities. We consider a comprehensive understanding by management 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 Authorised Deposit-Taking Institutions (ADIs) – including credit unions, building societies and friendly societies – regulated by APRA and operates according to its Prudential Standards. Independent auditors KPMG conduct an external audit of financial accounts. Audit findings are presented 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 are responsible for compliance with policies, procedures, applicable laws and regulations.

We have never had an 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 has not received any fines or sanctions for non-compliance with any laws and regulations relating to its business of banking.

bankmecu continues 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. It is the responsibility of the provider to report any breaches as they occur.

Licensing

bankmecu is licensed under the Corporations Act 2001 (Cth). Under the terms and conditions of the Australian Financial Services Licence (AFSL) (No 238431), the Bank may deal in or advise on deposit and payment products, superannuation and general insurance products. We also hold 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 a customer’s personal information. If the complainant is not satisfied with the outcome of the review, they can refer their complaint to the Office of the Australian Information Commissioner.

In 2012/13 there were two incidents where a customer received personal information of another customer not intended for them. Both incidents occurred as a result of staff error.

In both cases, bankmecu apologised to customers impacted by the error, counselled the staff members concerned, reviewed and updated procedures around handling information, and advised the customers that they may refer the matter to the Office of the Australian Information Commissioner if they were dissatisfied with the Bank’s response.

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.

Our 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’.

The Counselling and Performance Policy covers any issues with staff who attempt to mislead or behave dishonestly. Serious misconduct may result in instant termination of employment. No misconduct was identified during the year.

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

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

Card fraud

Card fraud significantly decreased by 45.94% ($210,406) in 2012/13. The reason for the reduction was due to sustained efforts from VISA, merchants, and law enforcement agencies. bankmecu’s move to 24/7 card fraud monitoring with Cuscal, chip card technology and the extensive use of PINs have also reduced counterfeit fraud.

Card not present fraud purchase (telephone and internet) were again the most common form of card fraud during 2012/13 and accounted for the highest losses.

We continue to provide training and guidelines to staff and customers on fraud awareness.

We have participated in public awareness campaigns which further educate customers around key fraud related issues.

Fraud reported in 2012/13

Reported in 2012/2013 No. of customers Value (AUD)

Card Not Received

2

$1,575

Fraudulent Use of Card Number

229

$100,816

Lost Card

1

$1,052

Stolen Card

32

$23,962

Redi Card

4

$4,806

Counterfeit / Skimmed

27

$46,663

Total

295

$178,874

During 2012/13 we suffered a Phishing attack resulting in customers and non customers receiving an email purporting to be from bankmecu. This email requested customers to input personal details such as card details, passcodes and mobile numbers, etc. As a result of this Phishing attack bankmecu suffered a total loss of $136,188 from 38 reported cases.

Lending fraud attempts also increased during 2012/13. A total of 33 cases ($3,229,673) were identified. These fraud attempts ranged from falsified supporting documentation, undisclosed liabilities, false identification and identification takeovers. From these attempts there was one loss of $25,650.

Competition and pricing

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

Product information and labelling

The Bank 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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