Warning to NZ banks: prove you’re clean
The regulators for the banking sector have delivered a sharp message to New Zealand's largest, mainly Australian-owned banks, to demonstrate clearly why their customers should believe their business practices differ from their Australian parents. This follows a string of revelations from an Australian banking royal commission of inquiry.
The governor of the Reserve Bank of New Zealand, Adrian Orr, and the chief executive of the Financial Markets Authority, Rob Everett, called representatives of the big banks together in Wellington yesterday, and made personal calls to the chief executives of those banks to reiterate their message.
Everett told Radio NZ in an interview this morning that: "It’s not credible to just say that New Zealand is different. You have to demonstrate why either the business structures here, or your business practices here, lead to different outcomes."
However, there was no need "at this point" for a banking inquiry in New Zealand.
Shocking practices revealed at the Australian banking royal commission this week include: accusations AMP illegally deducted service fees from customer accounts - and then lied to regulators about it; CBA charged fees to dead clients for years; and Westpac gave such bad advice to a client they lost their house - and then charged $40,000 for that advice.
What’s been highlighted... in Australia is really ugly. I think it’s devastating for the industry, the stories that are being told.
The chair of the Bankers Association of New Zealand, Westpac NZ chief executive David McLean, told RNZ's Morning Report today that bank customers should have faith in New Zealand regulators. He stressed that the New Zealand operations of Australian-owned banks had separate boards of directors, which were stacked with New Zealand residents. Local banks were closer to their communities than their Australian counterparts and operated a different banking culture, he said.
He implied that ANZ's settlement of the so-called "fair play on fees" test case, in which major banks were accused in a class action of over-charging for services, had been a move designed to move on from the issue rather than an admission of fault.
The National Business Review has reported this week that the FMA has instructed ANZ to update statements about conflicts of interest in its investment disclosure documents after it was revealed it had 'advised' a customer to invest all of a $450,000 nest-egg in ANZ products.
FMA's Rob Everett says the royal commission is a wake-up call. "What’s been highlighted... in Australia is really ugly. I think it’s devastating for the industry, the stories that are being told."
We haven’t seen any evidence of systemic abuses along the lines of the Australian industry, but... we can’t afford to be complacent.
The FMA was now "spending time here in New Zealand making sure that our work plans react to that," Everett says. "Where we’re looking is somewhat driven by the experience in Australia."
"To date, we haven’t seen any evidence of systemic abuses along the lines of the Australian industry, but as we’ve said to the New Zealand banks, we can’t afford to be complacent, we really have to up our game to make sure that those same issues aren’t being replicated here.
"But actually we think the banks need to front up and really explain why it should be different. And that’s the process that we’re going through with them now.”
The RBNZ and FMA were seeking "assurances, including in writing, as to the processes they’ve followed to check themselves against what’s coming out of the Royal Commission" and "that they have scrubbed their business models and that they have a basis for being confident that these issues don’t exist here”.
If banks were insufficiently responsive to the regulators' demands, Everett said "they’ll see more of us in court and less of us doing the education".
"To date, the trust levels in NZ have been better (than in other jurisdictions), but it will only take one or two big blow-ups for that to be damaged beyond repair. So we are urging the industry whilst they have the chance to get this right.”
Newsroom is powered by the generosity of readers like you, who support our mission to produce fearless, independent and provocative journalism.