A lot of water has flowed under the NAB board since APRA delivered its report to the NAB Board last week. In short, the NAB Board has disintegrated.

With multiple firms of lawyers and counsel representing the directors and the bank itself, and allegations of one sort or another flying about between the various parties, the bank has to be on auto-pilot. At least, one hopes it is.

The focus must now come on what the bank regulator and its boss, the Treasurer Mr Costello, need to do about it.

Make no mistake, if foreign regulators and law enforcement agencies with a finger in the pie, for example in the US, New York Attorney Eliot Spitzer, the SEC or Justice Department, or in the UK, the FSA, start their own investigations on matters they think are properly in their respective patches, then the locals will be playing catch up with the big boys. Things may then become, well, unpleasant.

The game has now changed dramatically. Let’s start with the question of legal conflicts.

Who briefed the august firm of Blake Dawson Waldron in their appointed role as ‘probity advisers’? The NAB Board? Apparently not. That task was apparently left to the NAB legal department.

Was BDW conflicted? As a firm who has done work for NAB before and would probably not act against the bank, then on that score, the answer would probably be no. However, should not a partner from another firm which had not previously acted for the bank and had no aspirations to act for the bank have been appointed as ‘probity adviser’ to avoid any question of conflict?

And why was a ‘probity adviser’ needed at all? Answer, because flags were raised over the appointment of PwC, apparently by Mrs Walter. And for Chairman Kraehe to apparently suggest that PwC was the only firm in the world who was capable of doing the job is surprising, to say the very least.

So why did the newly anointed and appointed CEO John Stewart, great mate, confidante and conversationalist counterparty of the now departed Frank Cicutto, go along with the appointment of PwC? It now seems at least one NAB director, Catherine Walter, objected loudly and often to her new Chairman about the wisdom of using PwC, but Stewart was silent, or was he? If he squawked, why did the directors not put him in the stocks as well for failing to toe the line?

And why did the rest of the NAB Board think it was OK for PwC to be reporting through the NAB’s chief legal counsel? Didn’t anyone think that eyebrows would be raised over the NAB’s legal department presiding over both the ‘probity adviser’ and the probitee or either of them for that matter?

And why should it have been necessary for Mrs Walter to apparently have had to put a stop to the NAB’s own legal department giving advice to the other seven directors in relation to her own position. Surely the other NAB directors, including CEO John Stewart are or should be experienced enough to have prevented that happening at the outset?

And who is giving instructions to the NAB’s lawyers about the various resolutions for the EGM? The NAB legal department, who is an arm of management, or is it the other directors?

Now there are up to ten firms of lawyers and senior counsel involved. What conflicts, if any, do they have? Isn’t it time each director laid their cards on the table and state who is legally representing them?

By now, the directors’ respective legal advisers would surely have pointed out to their clients that the responsibility of a public company director is individual and if they are to be properly legally protected, they need individual representation. And, of course, that is not to suggest in any way any wrongdoing by any of them. But when legal threats start to fly around the boardroom table, and the shareholders themselves have an interest which needs separate representation, it is surely only prudent of each director to be individually represented.

Which begs the question, who is now at the wheel at the NAB, the largest financial insitution in the land and one of the largest in the world? Who can properly now brief legal representatives of the NAB as a corporation? A totally discredited management? The NAB’s senior counsel and legal department late of HomeSide connection and loss of a fortune? A fractured board of directors with QC’s at 20 paces?

And who is minding the shop while all this is happening? Don’t expect the new CEO John Stewart to carry the day. No-one should forget he was a also director over a significantly relevant period.

Various so called ‘governance experts’ and financial commentators have rattled on about the dire consequences of the entire NAB board being cleaned out. Loss of corporate memory and the like. If that is true, it doesn’t put any faith in the bank’s risk management structure where such memory should properly reside.

And if anyone is relying on this board’s corporate memory, heaven help the financial system and the bank’s shareholders to say nothing of its customers. Apparent board amnesia over a $4 billion HomeSide disaster and other colorful unfortunate events in the NAB’s history over the last few years hardly seems the bedrock on which to build transparency, competence and respect.

It rather looks that Treasurer Costello and APRA may have to provide the independent legal advice to the bank and require it to follow it. There is no reason why APRA cannot step in and administer the functions of the bank board until a new one is formed. The existing directors would be required to stay on to provide all help and assistance, rather in the way a voluntary administration works, although there would be nothing voluntary about it. That should satisfy the corporate memory worriers. And whilst they’re at it, APRA might insist on another two percent of real capital, that’s tier one capital, just to make sure things are safe until they get a grip on the place.

And who ultimately caused all this grief and let the NAB get away with these shenanigans for so long?

The bank’s shareholders need look no further than themselves, aided and abetted by slack and incompetent bank analysts and media commentators who for so long were prepared to overlook the obvious in the pursuit of membership of a club of sycophants and profit at any cost.