THE DISTILLERY: Lynch pining

One commentator is disappointed by new ASIC guidelines, while others farewell Transurban's Chris Lynch.

During the global financial crisis, a number of now-infamous risky investment schemes targeting retail investors blew up, catching the corporate regulator with its pants down in the process. Though this was a common story in much of the world, it’s taken until now for the Australian Securities and Investments Commission to come up with a new set of guidelines for them. Unfortunately, The Age’s Adele Ferguson finds that the new requirements are somewhat underwhelming. Elsewhere, another commentator believes the banks aren’t increasing their margins due to higher overseas funding costs, but to compensate for poorer lending demand, while industry protection from Canberra is also on the agenda.

But first we start with The Age’s Adele Ferguson, who takes her readers through the guidelines that have just been set by ASIC to apparently keep managed investment schemes honest.

"ASIC is giving existing schemes until November to comply with the new financial requirements. It has also issued guidelines canvassing three options to improve disclosure. The problem with two of the three options is they do little or nothing. The first option is to maintain the status quo, which as history has shown, and ASIC's own surveillance has found, is hardly an option. Option two is ASIC provides clarification on disclosure in PDSs, including benchmarks and disclosure principles that apply and on advertising and educational material for investors. Option three is that current disclosure requirements continue to apply, with increased level of supervision of agribusiness scheme PDSs by ASIC, which again isn't an option because the current disclosure system hasn't worked.”

Meanwhile, The Sydney Morning Herald’s Ian Verrender argues that the big four banks aren’t nearly as reliant on overseas markets for funding as they were before the global financial crisis hit.

"If you read between the lines – in the banks' reports and in the business press – you'll get an idea of the real reasons behind the latest push to plump up the margins between borrowing and lending rates. Rather than borrowing costs, it is the simple fact that there is less demand for loans. Consumers and corporates are borrowing less and saving more. That may be cause for applause from those looking at the big picture. But for a bank, in the business of lending money, it is a trend that could threaten another year of record profits. The easy solution? Widen the profit margin.”

Thirdly in this edition of Distillery is The Australian’s economics correspondent David Uren, who urges his readers not to be seduced by the ACTU's calls for Canberra to protect certain industries, particularly the automotive sector, from jobs losses. He does so by putting those jobs losses into context.

"It sees a threat in the doubling over the past two decades in the number of people on casual, contract and labour hire work to about 40 per cent of the workforce. It wants government to impose job security requirements, limiting the use of casual and contract labour, on all enterprises tendering for government work or dependent on government funding. The decision by Toyota to cut 350 staff positions as it winds down its export business was condemned by the unions… The job losses need to be set in context. The workforce is constantly shifting. About 300,000 lose or leave their jobs each month and join the unemployment queues or quit the labour market altogether. A similar number gets work. The number of people who lost their jobs at Toyota represents about 10 minutes of turnover in the employment market.”

And fourthly, The Australian Financial Review’s Chanticleer columnist Tony Boyd got a few words from outgoing Transurban chief executive Chris Lynch that speak beyond that of an infrastructure boss concerned only for his shareholders.

"Lynch highlights the fact that there are a lot of vested interests involved when the government is awarding a concession. "I’ve said in the past, these are meat and potatoes types of investments, they don’t have outlandish upside, they are fairly predictable and fairly stable and you’ve got to be wary about large exits of value early on in the process.” That is a great point and one that governments must heed because it is only when infrastructure investment can be trusted and relied upon to deliver what it is promised that it will win the support of retail investors. There have been other big traffic forecast stuff-ups but those hit institutional investors in Sydney’s Cross City Tunnel and Lane Cove Tunnel.”

Staying with the departing Lynch for the rest of this morning’s business commentaries, The Australian’s John Durie says Transurban shareholders have great reason to be happy with their returns during the tenure of outgoing chief executive Chris Lynch. But, he argues Lynch’s tenure will be remembered as that of a financial disciplinarian rather than a great CEO. Meanwhile, Fairfax’s Insider columnist Ian McIlwraith says Lynch’s departure is rekindling a debate in Transurban about appropriate pay levels for their boss, given that Lynch signed on in the boom years before the GFC hit. Also, The Australian’s Tim Boreham noticed that there was no mention of Lynch wanting to spend more time with his family, an all too frequent sign that things are about to turn sour.

In domestic affairs, The Age’s Tim Colebatch delivers this piece to illustrate the ease with which economists, looking at the same figures, can disagree with each other about the Australian economy and to what extent. The Herald Sun’s Terry McCrann walks readers through the reasons why the big four banks are not legally obliged to pass on a rate cut and why they’re not necessarily greedy for doing so.

The Australian’s Jennifer Hewett, who is returning to The Australian Financial Review, previews another round of tinkering with the superannuation system, and The Age’s Michael West revisits his attack on the regulatory handling of Compass Resources and its half year results that only spanned a period of 42 days without any comparable period.

In international news, The Australian’s Judith Sloan brings word from the World Economic Forum’s meeting in Davos that the African nation of Guinea is doing a good job at mending its reputation as a politically corrupt nation too unstable for mining investment. And finally, The Australian’s Bryan Frith finds the chief executive of Danish engineering group FLSmidth potentially tripping over Australia’s truth in takeovers policy.