Saturday , July 11 2020
Home / Business / Jamie McPhee and the ‘Bank for Me’

Jamie McPhee and the ‘Bank for Me’

Born in Adelaide, McPhee is listed as one of Pembroke School’s notable alumni, next to the likes of media and sporting personality James Brayshaw and Walkley Award-winning journalist Sally Sara. His education continued at the University of Adelaide, where he graduated with honours with a bachelor of civil engineering – a field he would never work a day in.

McPhee returned from overseas in 1988 and would become one of South Australia’s leading businessmen. As chief executive of Adelaide Bank he spoke often of the power of having a community focus and strong reputation. But when Adelaide merged with Bendigo Bank in 2007, McPhee was overlooked for the top job and appointed executive director instead.

In 2010 he moved to Melbourne to take over as chief executive at ME Bank, a lender striving to become nationally recognised.

What does he do?

ME Bank, once known as Members Equity Bank, has been pitched as a rising challenger to the big four with a focus on cheaper products and better customer service. It’s owned by 26 industry superannuation funds and promotes its products through their union networks.

The bank has become known for its clever marketing. In 2015, the ‘bank’ was dropped from its name to become “ME” and the new logo uses thick black lines to rocket it into the predictable style of contemporary graphic design. McPhee oversaw the “banxiety” campaign of last year that encouraged dissatisfied customers to switch to ME.

Growing the bank’s customer base has been a core ambition for McPhee and under his watch numbers have doubled. But attracting new recruits has been harder than expected and the bank has never paid a dividend to its super fund shareholders despite capital injections to help it scale.

McPhee has been tasked with driving the costly and painstaking process of overhauling the bank’s technology core. This upgrade, seven years and counting in the making, is at the heart of the crisis that engulfed the bank.

What did he do this week?

McPhee was hauled in front of Liberal MP Tim Wilson’s economics committee on Wednesday for a second emergency hearing to probe the handling of the controversial change to its redraw policy.

To understand the issue, the difference between an offset account and redraw facility must be clear. If a customer makes payments on their mortgage above the scheduled minimum, they are able to access this cash via what is known as a redraw facility. Rightly or wrongly, customers had treated this facility like an offset account – a separate transaction account linked to your home loan – and many relied on it to pay bills.

Loading

In late April, ME Bank restricted the amount available in the redraw facility without any warning. A subcommittee responsible for the handling the redraw change decided customers should not be told in advance for fear of a rush of withdrawals. Customers were furious and senior banking experts raised questions over whether the bank breached federal credit legislation by failing to provide the mandatory 20-day notice period.

The bank spent a week defending the move as a well-intentioned effort to prevent customers falling into arrears, but after daily news coverage it eventually gave in and offered a grovelling apology. The policy was reversed and now 20 per cent of affected customers have had the original redraw facility reinstated.

McPhee was called in front of the economics committee for the first time on May 14, where he described minimal involvement on behalf of the financial regulators. After the appearance, however, the Australian Securities and Investments Commission requested McPhee correct the record to properly reflect its engagement over the issue. It turns out ASIC had specifically warned the bank it was important to communicate with customers due to the sensitivities involved in removing access to funds and had badgered the bank for updates and clarifications on its strategy.

McPhee did everything he could to distance himself from the decision. And while there were murmurs he might step down, the 55-year-old stood his ground and will forge on as the bank’s leader. However, ASIC signalled its investigation over the redraw and other matters was ongoing, so the worst could yet be ahead for the former state cricketer.

Why is this important?

The Hayne royal commission exposed systemic governance and cultural failures within the country’s most trusted financial institutions. Last year, the government legislated the Banking Executive Accountability Regime in an effort to hold senior executives personally accountable for misconduct and put an end to the corporate blame game. If an executive is found to be responsible, the BEAR means they can be stood down or disqualified from the industry altogether.

The royal commission absolved the non-bank superannuation sector of all sins; no dead customers were charged and all fees provided a service. But ME Bank’s deliberate disregard for keeping their customers informed, during a time of heightened financial anxiety, combined with a blatant effort to ignore the regulator’s warnings, shows the bank may have taken its feel-good image one step too far.

Most Viewed in Business

Loading

About admin

Check Also

Rampant technology sector offers growth in a low yield environment

“Our investment philosophy is investing in where the world is going,” Mr Moore said. Spaceship’s …