One out, one back is key to black art

Be worried if you ever feel the "hot breath" of a banking regulator on your neck when you are going for a morning jog.

Be worried if you ever feel the "hot breath" of a banking regulator on your neck when you are going for a morning jog.

The chairman of the Australian Prudential Regulation Authority, John Laker, yesterday offered some insights on what it was like being a regulator.

"I remember well before I ever got inducted into the black art of supervision, hearing a very older, much wiser, prudential supervisor ... saying that you've got to think, as a supervisor, of innovation as you would think about where you're positioning in a long distance race. The supervisor should be one back from the leader, and one out," Laker told a conference at Sydney's Sheraton on the Park organised by The Economist.

"One out, so that you can let innovation come through and let the faster and the better innovators come through, and one back so they can just feel your hot breath on their neck," Laker said.

He also offered some ideas on new laws that could better regulate the financial system.

"We can certainly do our best to intrude to identify it and to modify it," he said. "But you know, show me a piece of paper that says 'thou shalt not be stupid'. I'd love that regulation, but you know what, that won't help me at all."

BNY Mellon's chief executive of global markets, Art Certosimo, when asked how the system could be better regulated, said: "Here's the banker sitting next to these prestigious regulators. I gotta really answer these questions. The real answer is I spoke with John [Laker] and I told him just reach around my back and make my mouth move and tell me what to say," said Certosimo, who was on the same panel as Laker.

Executive pay

As for the thorny question of executive pay, Certosimo in true investment banker talk said: "I'd say if there was more friction around arbitrary executive pay rules, as opposed to looking at it from risk dynamics and incentives and clawbacks, there are certain principles there that I think make a heck of a lot of sense. But if we ever moved to just a hard cap, that would seem like punishment more than regulation." The State Bank of India's head of economic research, Brinda Jagirdar, was less complicated. "We are not greedy, that's what I can say," she said.

The Australian Securities and Investments Commission chairman, Greg Medcraft, was even more succinct. "My view is that we should let the market determine it - supply and demand, frankly."


The Coles boss Ian McLeod has made public some of the stock problems he faced when he joined the Wesfarmers-owned supermarket chain four years ago.

"I think we had four years' worth of coathangers when I arrived, to try and corner the coathanger market in Australia," McLeod said in a speech in Melbourne yesterday.

"And we know that we have a lot of customers that like Italian olive oil but we had more olive oil than there is water in Lake Como, I think, so that was one of the challenges we had." The Scotsman also revealed he had volunteered to appear in television advertisements instead of the celebrity chef Curtis Stone. "Apparently he's quite good looking as well. I offered to do it myself but was politely told I wasn't in the frame."

Sweet words

John "There'll Be Stories" Story must have felt slightly better about himself yesterday after getting a handful of claps when he was farewelled as a director of the troubled building materials group CSR.

"His counsel and experience have been invaluable to the company during a significant change following the demerger of Rinker in 2003 and, more recently, with the sale of Sucrogen," the CSR chairman, Jeremy Sutcliffe, told the group's annual meeting in Sydney yesterday about the group's longest-serving director.

"John, thank you very much indeed on behalf of your colleagues on the board, management and shareholders," as CSR shares touched a fresh 26-year low.

The comments must have been uplifting for Story, who last month abruptly resigned as the chairman of the Star casino owner Echo Entertainment, following a concerted campaign to dislodge him by the casino billionaire and Echo shareholder James Packer. Meanwhile, serial AGM ranter Jack Tilburn confirmed it was his 490th annual meeting. Seemed more like 10,000 to CBD.

CSR under glass

One CSR shareholder who expressed his frustration was Brian Chu from West Pennant Hills, who said he was "rather disappointed in the results of the investment".

Chu said his poor CSR investment had at least proved a handy case study for his students at the University of NSW, where he teaches risk and actuarial studies.

"I have been able to tell my students ... about looking carefully at financial reports and expecting the unexpected, which I am sure we all understand in the case of the perfect storm which CSR is facing," he said.

Another shareholder expressed his dismay over the name of CSR's glass business Viridian.

"Why not call it CSR glass? What does Viridian mean?" he asked. "I wonder if glass is being sufficiently promoted," the shareholder continued, arguing there were not enough windows being installed in homes.

But the CSR chairman, Jeremy Sutcliffe, was not budging over the Viridian name.

"I must admit, before I worked at CSR it worked on me," he said.

"And you know what? I like the name. I hear what you say and it is a great thing about debate, some people do and some people don't.

"And I've seen some disastrous name changes in my time ... but I've gotta tell you, I like it.

"But it takes all sorts, doesn't it."

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