The Teachers' Credit Society (TCS) was a

credit union A credit union, a type of financial institution similar to a commercial bank, is a member-owned nonprofit organization, nonprofit financial cooperative. Credit unions generally provide services to members similar to retail banks, including depo ...

founded in 1971 best known for its part in the

WA Inc WA Inc was a political scandal in Western Australia. In the 1980s, the state government, which was led for much of the period by premier Brian Burke, engaged in business dealings with several prominent businessmen, including Alan Bond, Laurie ...

scandal of 1987. Over the 16 years it operated, the TCS grew from a 300-member society into the largest credit union in Australia, with 40,000 members and A$550 million on deposit and millions out on loans. The TCS was considered one of the major driving forces behind the 1980s "debt-funded boom" in

Western Australia Western Australia (commonly abbreviated as WA) is a state of Australia occupying the western percent of the land area of Australia excluding external territories. It is bounded by the Indian Ocean to the north and west, the Southern Ocean to th ...

(WA) and its collapse, along with the collapse of several other large corporations within WA such as

Qintex Qintex Limited was an Australian financial services company founded in 1975 as Takeovers, Equities & Management Securities (TEAM). It was renamed Qintex Limited and came to prominence in 1986, collapsing five years later in 1991. Its main share ...

Bond Corporation Alan Bond (22 April 1938 – 5 June 2015) was an English-born Australian businessman noted for his high-profile and often corrupt business dealings. These included his central role in the WA Inc scandals of the 1980s, and what was at the time ...

and The Bell Group, triggered an economic recession in the state.

Role in WA Inc

By the 1980s, TCS was already one of Australia's largest credit unions, however they grew rapidly during the economic liberalisation and deregulation of the Australian economy under the Hawke government. With the repeal of section 54-57 of the ''Credit Unions Act 1979'' in 1984, the society was permitted to offer commercial loans. Previously credit unions were restricted to lending "modest amounts" to members for their "personal requirements". While the society offered very few loans in the first year of deregulation 1985, by the second year, 1986, a substantial amount of their loan portfolio was commercial, and they no longer met their

reserve requirements Reserve requirements are central bank regulations that set the minimum amount that a commercial bank must hold in liquid assets. This minimum amount, commonly referred to as the commercial bank's reserve, is generally determined by the centra ...

. During this period TCS were offering higher interest rates to their members than other societies to attract funds. This combined with the failure to meet reserve led to an inspection by the WA Registrar of Credit Unions. This inspection resulted in no action, however concerns were raised about the lack of diversity in their loan portfolio. Specifically the inspectors cited high levels of exposure to four individuals, and

Rothwells Lawrence Robert "Laurie" Connell (died 27 February 1996) was a Western Australian business entrepreneur. As chairman of the Rothwells merchant bank, he was well known for his dealings with the Government of Western Australia and his close rela ...

. At the time of collapse, the four individuals owed the company a total of over A$118 million, more than 22% of the society's loan portfolio. Roth Auditors in 1986 also raised concerns about the society's loan lending procedures, and the board members' minimal accounting experience. They also recommended the society appoint an internal auditor. Another concern marked in the later royal commission was the overbearing personality of general manager, Alex Clark; leading to an ignorance of risk and the company officers being unable to challenge Clark on his high risk leadership. Following the release of the 1986 annual report in March, the society experienced a

run Run(s) or RUN may refer to: Places * Run (island), one of the Banda Islands in Indonesia * Run (stream), a stream in the Dutch province of North Brabant People * Run (rapper), Joseph Simmons, now known as "Reverend Run", from the hip-hop group ...

on liquid cash, resulting in an application for an A$18 million loan from the R&I Bank. Despite receiving the loan the society was not able to recover after the

1987 stock market crash Black Monday is the name commonly given to the global, sudden, severe, and largely unexpected stock market crash on Monday, October 19, 1987. In Australia and New Zealand, the day is also referred to as ''Black Tuesday'' because of the time z ...

, and collapsed. In August 1987 the society was absorbed by the R&I Bank, purportedly to protect its members. This drew much media attention and criticism, and set in motion what would later become the

inquiries and Royal commission. In 1988 charges were filed against several members of the board and the four major loan holders. In addition the government had placed nine companies into receivership and issued formal demands to over 170 account in an attempt to recover losses. In 1990 Alex Clark was found guilty of five counts of false accounting, and one count in attempted false pretenses. He was sentenced to 2.5 years in jail.

References

{{Business in Australia , state=autocollapse Companies based in Western Australia 1980s in Western Australia Credit unions of Australia

Role in WA Inc

See also

References