ASB, BNZ owners face crime accusations

Possible criminal charges for banks in Australia could act as a warning to their New Zealand subsidiaries.

Australia’s royal commission of inquiry into misconduct in the banking, superannuation and financial services sector earlier this year discovered widespread issues within the industry.

Now, National Australia Bank (NAB), which owns Bank of New Zealand, and Commonwealth Bank of Australia (CBA), which owns ASB, have been accused of possible criminal offences.

NAB came in for the harshest assessment by counsel assisting the commission Michael Hodge, QC. The recommended civil breaches against NAB cover alleged misconduct in relation to the grandfathering of commissions, charging fees to dead customer, charging fees for no service, and failing to protect customers being moved into MySuper products. It is also accused of tardy breach reporting, which can be a criminal offence.

The submissions suggested there had also been a string of breaches of the law by CBA. The inquiry pointed to failures to provide financial services efficiently and fairly, a failure to put the interests of members over those of advisers, and a failure to move 13,000 super funds to MySuper accounts by the deadline, which had been admitted by the bank.

CBA’s trustee business may have also breached Australia’s Superannuation Industry (Supervision) Act for knowingly charging dead clients for advice and it may have made a possible criminal offence under the Corporations Act over its allegedly tardy breach reporting.

The bank also breached its legal obligations by describing some investment products as ‘‘commission-free’’, then taking commissions and keeping them in the bank.

Massey University banking experts David Tripe and Claire Matthews said it was not an immediate problem for BNZ and ASB. ‘‘There is a step between suggestion of criminal charges for banks in Australia and their actually being laid,’’ Tripe said.

‘‘Even if they are laid, however, I don’t see much in the way of implications for the banks here until, or unless, we can find some evidence of significant or systematic misconduct.’’

Matthews agreed but said it could still make a difference. ‘‘It may sharpen the thinking of banks’ managements and boards to some extent by reminding them that this is a possible outcome of a finding of misconduct.’’

ASB and BNZ have been approached for comment.

The Reserve Bank and Financial Markets Authority are examining New Zealand banks’ processes to determine whether there is a risk of poor conduct here, too.