Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 347

Are Australian bank boards fit for purpose?

Australian banks have certainly taken criticism over the last couple of years, much of it deserved and some of it produced for the pleasure of the media. Banks have been in a never-ending cycle of public-attested mistakes. While culture and greed are often cited, I doubt this is really the case.

One area worth exploring is whether banks have the right management and governance experience for the modern business environment. This is not a question of a director’s ‘smarts’ but rather if traditional experiences are still as relevant.

Most recent bank losses have little to do with lending losses. They have been operational failures.

CBA copped a $700 million dollar fine for its “software error” causing breaches with AUSTRAC’s anti-money laundering (AML) rules.

Westpac lost its CEO and Chairman due to AML failures on small international transactions in what AUSTRAC said was due to a lack of "appropriate IT systems and automated solutions”.

In many respects, a cold analysis of banking governance suggests the above examples were accidents waiting to occur.

First, the good news. When running a heatmap over the skills of bank directors, they rate well in the core skills of ‘Risk and Audit’, ‘Economic and Financial Theory’, ‘Accounting’, ‘Industry Expertise’ and holding responsibilities in ‘Large Commercial Business’.

But times are changing at an ever-increasing pace. The required skills from a director ten years ago are not those required today. Banks now resemble huge digital machines run at high speed sitting on top of large capital bases. Staff numbers are continually cut and those remaining have more diverse and larger responsibilities.

Unfortunately, many bank directors lack some really important business experience. They don’t understand technology, they don’t have operations skills and they are light on human resource experience. These skills are thought to exist because they may have held senior roles like a CEO of a large company.

The reality is you need hands-on experience and scar tissue from being deeply involved in technology and operations to know where the subtle but real risks exist.

Technology is moving under our feet as it evolves and living with these new risks and ambiguity can only be learnt on the front line. Being a ‘good people manager’ will only give a partial credit for these complex skills.

When we look at these new skill requirements our directors are coming up short.

This second table clearly shows that banks could materially improve the diversity of skills on a board. Historically, many would argue that these skills are of second order. Directors need to know how to run big companies with large staff numbers.

But that is no longer the case. Knowing how to run technology is perhaps even more important in avoiding a scandal that makes the front page of the Australian Financial Review than in driving commercial success.

 

Donald Hellyer is Director of OpenDirector and CEO of the development company BigFuture.

 

  •   4 March 2020
  • 4
  •      
  •   
4 Comments
Jonathan
March 04, 2020

Thanks Donald - another overlooked skill for bank boards is credit assessment. Insolvent banks are almost always brought down by bad lending, but few (usually none) of the directors understand how to lend money. It's like a retailer (Coles, Woolworths or Myer) having no one with retail experience on their board - it would seem an obvious oversight. Banks are very large beasts requiring a wide range of skills to be managed correctly.

Donald Hellyer
March 04, 2020

Agreed Jonathan, it just that recent losses in the banking sector have been tech related. I am sure lending losses will return again!!

Steve
March 07, 2020

Of greater concern is that the banks have become the political punching bags of the Industry Super funds. Given their recent run of mergers, they are slowly evolving into 4 pillars themselves & with close to 1 trillion in FUM & fast growing, are becoming far too powerful. Perhaps the Fed Govt should introduce anti-trust legislation to prevent them controlling Bank Boards, or any other publicly listed company.

Sandi
March 07, 2020

Taking the skills matrix to the next level - very useful tool.
It also adds to discussion of role of the Board and the Executive in the business management...
If Technology or HR are specific skills that are not represented on the Bank Board and they should be - not sure how a HR professional or CTO/CIO will actually get invited to join these Boards against current criteria.

 

Leave a Comment:

RELATED ARTICLES

Why 'boring' Big Four banks remain attractive

Who gets the gold stars this bank reporting season?

The value of wealth management for Australian banks

banner

Most viewed in recent weeks

The strange effect of the 30% minimum capital gains tax

The 30% minimum tax on capital gains sits at the heart of the budget's proposed reforms. Yet the mechanics reveal anomalies that introduce unexpected distortions that raise questions about its design.

Does your will qualify for the discretionary testamentary trust exemption?

Treasury has confirmed the exemption many families were hoping for. But buried in the fine print are two conditions that could leave some wills on the wrong side of the exemption, despite years of careful planning.

Ranking three common retirement strategies

The defining challenge of retirement isn't just about building wealth, it's about converting your lifetime savings into sustainable income. A holistic understanding of different strategies can improve long-term outcomes.

Are you making these SMSF mistakes?

After four decades advising investors, there are a few common mistakes I've seen SMSF investors make. From holding too much cash and chasing yield to overtrading and trusting tips. Are these errors costing you?

Why Australian shares are falling behind the world

Australia’s market boasts a long record of outperformance, but recent results tell a different story. Is the ASX’s lagging performance a temporary setback or evidence that structural forces will keep global markets ahead?

Australia has saved $4.5 trillion for retirement. Here's what matters more

Most Australians approaching retirement can tell you the exact dollar value of their super account. But success depends on more than a sizeable balance. Here's four key questions to ask yourself at the start of the financial year. 

Latest Updates

Investment strategies

UniSuper CIO shares his reflections on the 2025-2026 financial year

Markets climbed a wall of worry in FY26, but artificial intelligence remained the dominant force, rewarding some of the world’s biggest companies while leaving others behind.

Planning

Post-Budget blues? A knee jerk won’t help

Sweeping tax changes are reshaping the investment landscape and many investors are considering major restructures. But before chasing lower tax bills, it's worth asking whether those decisions will strengthen—or undermine your ability to build wealth across generations.

Investment strategies

Is value investing still relevant in today’s stockmarkets?

Is value investing relevant in an age when momentum investing, quant strategies and index funds increasingly dominate markets? It is underappreciated how share price distortions may be creating some of the best opportunities for patient, disciplined investors.

Investment strategies

How to find opportunity in global equities

Australia's concentrated market makes global diversification essential, but breadth alone is not enough. Investors still need a disciplined framework combining business quality, sensible valuation and a credible catalyst.

Gold

What keeps the world’s most patient investors returning to gold

While many investors are asking whether gold has peaked, the world's central banks appear to be asking different questions altogether. Their thinking offers useful insights for long-term investors.

Investment strategies

Don’t underestimate Australia

Investor sentiment towards Australia has turned increasingly gloomy, but the data tells a different story. There are still plenty of reasons to remain optimistic.

Superannuation

Are you making these SMSF mistakes?

After four decades advising investors, there are a few common mistakes I've seen SMSF investors make. From holding too much cash and chasing yield to overtrading and trusting tips. Are these errors costing you?

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.