The Dominion Post

It can’t be business as usual. We need a royal commission

- Rob Stock rob.stock@stuff.co.nz

The NAB/BNZ files contain more revelation­s that behind banks’ shiny corporate facades, things can be very much amiss. There can be creaking IT systems, extraordin­ary errors kept from the ears of the public, overchargi­ng for services like KiwiSaver, and a focus on profit over the interests of customers.

The NAB/BNZ files show a bank playing an extraordin­ary game of catchup to ensure it meets its legal and moral obligation­s to society and its customers, while at the same time slashing staffing numbers.

NAB cut so deep in a bid to carry on delivering growth to shareholde­rs that it’s been losing the very people it depends on to do the catching up. BNZ was expected to play its part in the job cuts.

Here in New Zealand, revelation­s that ANZ can’t keep control of its chief executive’s expenses, or sell a mansion for the going rate, or report publicly on related-party deals, have been followed by revelation­s that BNZ in 2016, 2017 and 2018 could not guarantee it was meeting its anti-money laundering and other legal obligation­s, and that its IT systems were in a mess.

And this comes in a decade and a half of some pretty shady behaviour by banks, which time and again have not come out looking at all like they have their customers’ best interests at heart, or those of New Zealand.

Let’s run through them.

Back in 2009, the four big Australian­owned banks – ASB, BNZ, Westpac and ANZ – agreed to pay a record combined $2.2 billion to the Inland Revenue to settle tax-avoidance claims over complex internatio­nal ‘‘structured finance’’ transactio­ns. They had been caught only because the IRD, after years of not auditing the banks, finally started doing its job.

Then we had evidence that a bank could mis-sell products on a vast scale, when ANZ was forced to admit it had promoted risky loan funds to investors as an alternativ­e to safe term deposits, and spent about $500 million to buy the units in the funds from around 15,000 investors, who said they would never have invested in the funds had they known how risky they were.

During Stuff’s reporting on the story, it was revealed ANZ had quietly shifted all its private clients out of the funds, but had left ordinary mums and dads invested.

Then in 2014 came the interest rate swap sales scandal, again uncovered by Stuff reporting, which prompted the Commerce Commission to investigat­e. Again, all the big Australian banks were involved.

Janine Walsh, the woman who did more than any to bring the scandal to light, says suicides followed some of the farm losses.

And there were the scandals the banks here ducked. For the life of me, I can’t understand how it was that Australia (and the British) forced the banks to stop selling practicall­y worthless credit card and loans insurance, and compensate customers, while we here did nothing.

There are really worrying signs that bank staff can do the oddest of things and expect to get away with them, as shown by the ANZ bank manager who changed around a dying woman’s accounts without getting a written authority, or the recent behaviour of Kiwibank’s chief risk officer, who seemed to have very little grasp of the risk of using his work email to intervene in a dispute between his wife’s company and a Kiwibank customer.

Now New Zealand hasn’t ignored all of this, but nor has it held a royal commission. Last year, prompted by fears the public here might lose confidence in banks, the Financial Markets Authority (FMA) and the Reserve Bank (RBNZ) started a ‘‘conduct and culture’’ review of banking.

It was an informatio­n dive into the banks (asking banks for informatio­n, and interviewi­ng bank staff), and it concluded that some dubious things were going on.

Banks had underinves­ted in systems, needed to ditch their sales-over-service incentives for staff to push volumes of loans and KiwiSaver at customers, and could not demonstrat­e they had customers’ best interests at heart.

They were error-prone, and slow to pay back money they had wrongly charged people.

But the powers-that-be (government, FMA, RBNZ) do not want a royal commission. The fear is that one could derail, or delay, the fixes the current Government has planned.

Behind that fear is the worry that this could be a one-term government, and we enter a new era of bank-friendly Nationalle­d rule.

We are well into a very Kiwi 10-year journey to get the shonkiness and exploitati­on out of financial services.

We re-wrote a lot of our financial services laws after the collapse of the finance companies, ditched the old donothing

Securities Commission in 2011 to create the FMA, and under the current Government are moving to fast track ‘‘conduct’’ laws for the banks.

There’s a debt mediation bill before Parliament to regulate how banks treat farmers who hit financial trouble, a law we plainly needed back in 2012.

We are also overhaulin­g lending laws, which, predictabl­y, has the banks spooked.

This is a very New Zealand way of going about things; the tidy-up without raking up the past, and the hope that passing new laws fixes a problem.

The most powerful thing about the Australian Royal Commission, however, has been to end the banks’ and the regulators’ ability to carry on with business as usual. It brought to the surface a great deal that was not known, and left the banks in no doubt that the storm would not blow over and they go back to the profits-friendly status quo of don’t-ask-don’t-tell.

And that’s precisely why we need a banking royal commission in New Zealand.

We have been developing a culture of more muscular regulators, representi­ng a continued shift away from the failed ‘‘caveat emptor/buyer beware’’ economic model New Zealand once embraced.

And the Australian Royal Commission blew change across here, both sparking the FMA/RBNZ into action, and, the NAB/BNZ files show, the Kiwi subsidiari­es of Aussie banks.

Politician­s in Australia can now no longer buddy up to the banks, or swallow their behind-the-scenes lobbying, which amounted to the philosophy: What’s good for the banks is good for the country, and anything you do that reins the banks in damages the economy.

They can no longer starve the regulators of the resources they need to do their jobs to protect the public and the economy.

Now, wouldn’t we want that for New Zealand?

 ??  ?? Another month, another set of revelation­s that one of our big banks isn’t all we thought it was.
Another month, another set of revelation­s that one of our big banks isn’t all we thought it was.
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