Stop this pu­ri­tan­i­cal bu­reau­cratic med­dling

Sunday Star-Times - - FOCUS - Damien Grant

The pu­ri­tan­i­cal small­mind­ed­ness of our bu­reau­cratic class is per­fectly cap­tured by a petty in­ter­ro­ga­tion launched by the Fi­nan­cial Mar­kets Author­ity (FMA) and the Re­serve Bank into the cul­ture of our bank­ing in­dus­try.

Banks are pri­vate firms that have to com­pete to earn a dol­lar. Twenty-six out­fits hold bank­ing li­censes and there are smaller non-bank­ing out­fits con­stantly chip­ping away at their mar­gins.

Yet both Westpac and BNZ re­cently recorded bil­lion-dol­lar prof­its and the ANZ fell just pen­nies short of hit­ting the two bil­lion mark.

If you don’t like your bank, you can change. Ac­cord­ing to the NZ Bankers As­so­ci­a­tion we have the ‘‘fastest switch­ing in the world’’ (al­though be­ing an in­dus­try body they would say that). Our fi­nan­cial sys­tem re­quires sta­ble, con­ser­va­tive, well-run banks. They achieve this by mak­ing large prof­its in the good times so they can weather the oc­ca­sional re­ces­sion.

Gov­ern­ments should stay away from bank­ing. The last bank fail­ure was the state-owned BNZ in 1990. In­com­ing Prime Min­is­ter Jim Bolger was forced to tip in $380m of tax-pay­ers’ funds to stop the bank im­plod­ing. Thank­fully the Aus­tralians took this turkey off the Crown’s hands a few years later and it’s been a solid per­former ever since.

Re­peated fail­ures, in­clud­ing He­len Clark gift­ing a bil­lion dol­lars to the wealthy in­vestors of South Can­ter­bury with her Crown guar­an­tee scheme, has not stopped Welling­ton’s con­fi­dence that they should be med­dling in the bank­ing in­dus­try.

This mis­guided be­lief pre­sum­ably prompted the FMA and Re­serve Bank to in­ves­ti­gate our bank­ing cul­ture, and the id­iocy of the fi­nal re­port is best demon­strated by quot­ing from it.

‘‘Where banks have not iden­ti­fied any is­sues re­quir­ing re­me­di­a­tion, bank boards and se­nior man­age­ment need to se­ri­ously chal­lenge whether this is be­cause there are no is­sues, or be­cause there are weak­nesses in the pro­cesses and sys­tems for iden­ti­fy­ing and record­ing is­sues.’’

Kafka could not have penned a bet­ter line.

The main gripe about banks ap­pears to be that they make too much money and to be fair they prob­a­bly do, but only be­cause the Re­serve Bank im­poses op­pres­sive re­quire­ments on who can be­comes a bank and the FMA has suc­cess­fully reg­u­lated the sec­ond-tier fi­nance in­dus­try out of ex­is­tence.

Firms that fail to re­spond to our de­mands will be re­placed by those that do. The best guardians of a bank’s cus­tomers are the cus­tomers them­selves.

The FMA serves no pur­pose other than to in­su­late a le­gion of govern­ment bu­reau­crats from the in­dig­nity of hon­est work.

The best guardians of a bank’s cus­tomers are the cus­tomers them­selves.

Newspapers in English

Newspapers from New Zealand

© PressReader. All rights reserved.