Prove we can trust you: FMA
Big banks have altered the incentive schemes pressuring staff into selling financial products, but First Union says they haven’t gone far enough.
Bank staff in branches and call centres used to be set hard dollar targets for the different product lines they had to sell, such as loans, Kiwisaver and insurance to customers, or risk missing out on bonuses.
They also risked being put into humiliating and stressful ‘‘performance management’’.
Following the publication of the damning Sedgwick report in Australia last year, the banks have toned down the incentive schemes, which have been blamed for a toxic sales-driven culture in Australian banks.
Banks now use a ‘‘balanced scorecard’’ approach, taking more account of things such as customer feedback.
But Stephen Parry from First Union said the changes had not tackled the ‘‘toxic’’ sales-driven culture of the banks, and he called for an inquiry and and for all sales targets for bank staff to be outlawed.
‘‘A royal commission would give the public confidence that the interests of consumers and finance sector workers are properly balanced against the profit motive of New Zealand’s private-sector banks, particularly in light of the indiscretions of their parent companies in Australia,’’ Parry said.
Karen Scott-howman from the New Zealand Bankers’ Association (NZBA) said the changes to incentive schemes reflected banks’ commitment to ‘‘continuous improvement’’.
She said all the major New Zealand banks had committed to implementing the recommendations of the Sedgwick report.
The Sedgwick report was about Australian banks, but their New Zealand subsidiaries ASB, ANZ, Bank of New Zealand and Westpac used similar incentive schemes, Parry said.
‘‘There has been quite a bit of movement over the last year away from a really explicit sales culture towards a more nuanced approach.’’
The banks had abolished dollarbased targets for each of a number of specific products such as Kiwisaver, home loans, credit cards and overdrafts, where failing to hit one of the targets effectively meant failing on all.
In their place was a ‘‘balanced scorecard’’ approach, where sales accounted for about 25 per cent of targets, and the rest was based on factors such as customer feedback.
However, despite the changes, one core thing had not changed. ‘‘If you don’t meet your targets, you don’t get your bonus,’’ Parry said.
‘‘The bonus only accounts for 5 [per cent] to 10 per cent of the remuneration of a bank worker, but it still informs the culture.’’
He said sales targets were not good for bank workers, or Kiwis’ wallets. ‘‘Our members regularly report ... being uncomfortable about having to offer products which consumers do not necessarily need or want.’’ The chief executives of New Zealand’s Australian-owned banks have been told by the Financial Markets Authority (FMA) and the Reserve Bank to prove they are not abusing customers’ trust.
In the wake of shocking revelations from the Australian royal commission of inquiry into banking, FMA chief executive Rob Everett revealed that on Tuesday he called the New Zealand CEOS of the big Australian-owned banks together, alongside Adrian Orr, governor of the Reserve Bank.
Everett wanted more details on how they were different to their Australian parent companies, whose lending and financial advice businesses have been scrutinised and found wanting in Australia.
‘‘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,’’ Everett said, speaking on RNZ’S Morning Report.
Everett said that ‘‘to date we haven’t seen any evidence of systemic abuses along the lines of the Australian industry’’.
In response, the New Zealand Bankers’ Association (NZBA) wrote to the Reserve Bank and FMA saying it would provide any evidence needed to prove Australian-style abuses were not happening in New Zealand.
In a letter to the regulators, the NZBA’S Karen Scott-howman said: ‘‘We believe we have a strong banking culture in New Zealand. We fully accept we need to back up that position with proof, and we’re happy to work openly and constructively with our regulators to do that.’’
The NZBA also committed to work with government agencies to establish a ‘‘bad conduct’’ register to allow reporting of employee conduct that fell below community expectations.
It would also finalise a new edition of the Code of Banking Practice that better communicated banks’ existing customer commitments.