You can’t please everyone all of the time in IR. On one side you’ve got analysts crying out for more information. On the other – in some companies, at least – you’ve got management desperately trying to withhold information. And at the same time you’re expected to get everything right all the time. That ain’t always easy.
Frans Bedaux, head of the International Investor Relations Federation, found that out to his cost in March in his capacity as head of investor relations at Dutch-based bank ABN Amro. Somewhat ironically, Bedaux invoked the wrath of ABN Amro’s management after some of his comments at a corporate governance conference in Amsterdam.
Bedaux told delegates that in some years, ‘ABN Amro’s losses through fraud exceed its losses on loans.’ He added that the bank is getting an ever better grip on credit and market risks, whereas the so-called ‘operational risk’ (mainly fraud) has not received enough attention. Bedaux said losses through fraud are growing, not only because of fraud with debit and credit cards, but also because of criminals hacking into ABN Amro’s computer systems: ‘Criminals are getting smarter all the time.’
These and other remarks by Bedaux that were published by the Dutch financial newspaper, Het Financieele Dagblad, which had been invited to the conference, caused a bit of a storm. ABN Amro denied Bedaux’s statements in very strong terms. ‘It’s simply not true,’ said Jules Prast, head of ABN Amro’s press office. ‘Mr Bedaux has made a bad mistake, comparing the wrong figures. Our losses through fraud are on average just a very small proportion of our losses on loans and even in bad fraud years come nowhere near them.’
The public row on such a sensitive issue as bank fraud is even more remarkable given the fact that both Bedaux and Prast saw the article before publication. Bedaux expressed his discontent with the ‘journalistic sauce poured over my statements’, but did not deny the contents.
Poor disclosure
On initial inspection, it looks as if Bedaux did indeed make a mistake. In a bad year like 1996, ABN Amro’s losses through fraud could run into ‘hundreds of millions of Dutch guilders’ – that’s according to Bedaux himself. In the same year, ABN Amro’s total balance of provision for loan losses was G1.25 bn, a much higher figure. This compares to outstanding loans to the private sector alone of G315 bn.
Most Anglo-Saxon banks would give the balance of new provisions and releases of old provisions. But in this case – as with other Dutch banks – it is very difficult to get a clear view. In the Netherlands, banks have always been particularly secretive about their losses through fraud and loans. Until recently, Dutch banks did not disclose their yearly provisions for loan losses. Even now, reporting on this subject is nowhere near as transparent as in, say, the US.
Estimating the losses through fraud of a Dutch bank is extremely difficult. Some of the money lost through fraud can be recovered but the banks do not give figures in their annual accounts.
Wouldn’t it be a good idea for ABN Amro and other banks to be more open about their losses? Jules Prast does not think so. ‘If there is something we need to report, we will do so. But we are a bank, we are not in the business of being open just for the sake of it.’
Nor, it seems, is Bedaux in the business of being open just for the sake of it – despite his position as head of the global IR federation. He firmly instructed the IIRF administrative offices in London not to send Investor Relations magazine a photograph to accompany this article since he hadn’t seen its contents. He even denied having spoken to our journalist.
Bedaux, of course, believes his comments have been misinterpreted and says he might have been more careful if he’d known the Het Financieele Dagblad journalist was going to be present at the conference. He agrees he talked about fraud but adds he also referred to credit losses caused by fraudulent activities on the part of clients which weren’t adequately explained in the press.
