Cba Board Rejects Criticism Over Delay In Bad Debt Warning
The Age
Monday December 22, 2008
COMMONWEALTH Bank's board is standing firmly behind its top executives as regulators begin an assessment this week into whether the banking giant breached disclosure rules surrounding its $2billion capital raising.
But senior CBA treasury and financial officials are under intense pressure, with the bank expected to seek talks with investors early in the new year to smooth over any damage from the affair.In a statement, CBA chairman John Schubert said both chief executive Ralph Norris and chief financial officer David Craig had the "full support" of the board.Mr Craig, who has come under intense criticism from analysts, declined to comment further when contacted by BusinessDay.Despite speculation the CBA board would hold a review into the matter, it is understood no board meetings have been planned for this week.CBA has so far disputed any rules were broken when it tried to warn a small group of investors about the rising level of bad debts before the information was publicly released.The bank claims there was no need to make its warning public at the time because it did not consider the information materially significant.BusinessDay reported last week that the Australian Securities Exchange had referred the matter to the Australian Securities & Investments Commission for further investigation.CBA has previously told analysts that a material issue was something that had more than a 10 per cent impact on earnings.But analysts disagreed with this interpretation, saying this would translate to an earnings swing of hundreds of millions of dollars."I would consider that material kicks in well before then," one analyst said yesterday.Rival bank executives said CBA should have made it more broadly known to the market as soon is it was certain that its bad debt charges were higher than its internal forecasts."Good governance says whenever you are aware of a material impact on your profit then you should come out straightaway," said one rival senior executive. "Something like this has a huge impact on reputation."CBA said it had known for more than a month that its bad debt charges were running higher than expected. Management was informed on November 16 - just three days after investors were told bad debts were expected to run at between 0.4 and 0.5 per cent. Last week investors were told this figure would now be about 0.6 per cent.But this information was considered confidential because it was only in the possession of management and "was information that a reasonable person would not expect to be disclosed".Several big-name companies have recently fallen foul of the continuous disclosure rules. Earlier this year, Rio Tinto was fined $100,000 for sloppy disclosure in relation to its acquisition of Alcan.Promina was fined a similar amount for being slow to release details of a takeover approach from Suncorp-Metway.
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