Banks held to account

Financial institutions must show that they are different to the Aussies, insists

New Zealand banks have an obligation to show they’re different from their scandalridden counterparts in Australia, says Finance Minister Grant Robertson.

Robertson said yesterday the Government was “watching very closely what’s happening in Australia”, where a Royal Commission has been looking into misconduct in the financial services industry.

“We’ve received assurances that the kinds of things that have been talked about in Australia, which are very concerning, are not present in New Zealand, but I think it’s right for the FMA and the Reserve Bank to be seeking evidence of that and we will be looking closely at that,” he said.

“I think we need to make sure we’ve got the evidence. We’ve been told by the New Zealand-based banks that they don’t operate in the ways that are causing concern in Australia, but it is important we have the evidence of that and that’s what the [Financial Markets Authority] and the Reserve Bank are asking for and I think that’s the right thing to do.”

Asked whether putting the onus on banks was treating them as being “guilty until proven innocent”, Robertson said: “I just think the scale of what we’re seeing in Australia is so significant and given the ownership stake of Australian banks in New Zealand banks that there is an obligation on those New Zealand banks to show that evidence. I haven’t seen any evidence that they’re behaving in the way that the Australian [banks] are but that will be why the concern needs to be addressed.”

Financial Markets Authority chief executive Rob Everett and Reserve Bank governor Adrian Orr called a meeting with 15 New Zealand bank bosses on Monday following damning revelations from Australia’s Royal Commission into misconduct in the financial services industry.

Last week saw the completion of a second round of hearings by the Royal Commission which centred around financial advice.

It revealed financial service provider AMP had charged fees for no advice and lied to the regulator while Commonwealth Bank of Australia admitted charging fees to clients who were deceased.

Up until now the FMA and the RBNZ have said they were watching the inquiry closely but would wait until the first report came out on September 30 before taking action.

Everett said over the last couple of weeks he had spoken individually to all the chief executives of the big banks — the four Australian-owned banks — ANZ, ASB, BNZ and Westpac, as well as Kiwibank and Heartland Bank and financial services firm AMP.

But as events unfolded at the Royal Commission he and Orr decided jointly to call the banks together and approached the New Zealand Bankers Association council to organise it.

“Over this last two weeks, which was the second phase of the Royal Commission, the tenor of some of the stuff being highlighted, particularly the failure to fix issues discussed by the regulator several years ago, and adding to that the lying to the regulator . . we just felt that it wasn’t enough for the New Zealand banks to say New Zealand is different and it is not happening here.”

Everett said it had asked the banks to come back with an initial response in the next couple of weeks to explain what they were doing before the Royal Commission and what they were now doing in response to it.

First Union said it welcomed news that the Financial Markets Authority and Reserve Bank were looking into the business practices of New Zealand’s banks.

However, the union called on the Government to convene a full Royal Commission.

Stephen Parry, national finance sector organiser, said the single biggest complaint from the union’s members was the pressure to sell financial products such as life insurance, credit cards or mortgages to meet targets. “Our members regularly report feeling stressed as a result of high sales targets, as well as being uncomfortable about having to offer products which consumers do not necessarily need or want,” Parry said. A Royal Commission would give the public confidence that the interests of consumers and finance sector workers were properly balanced against the profit motive of private sector banks. “We strongly encourage the Government to convene a Royal Commission or a similar inquiry into the New Zealand finance sector, and that the use of sales targets be included in the terms of reference.” New Zealand Bankers’ Association chief executive Karen Scott-Howman said banks worked hard to attract and retain customers. “That includes providing customers with products and services that suit their individual needs and circumstances,” she said. “The major banks have already made changes to their remuneration policies to ensure retail staff no longer receive incentives based directly on sales performance, or are in the process of doing so”. “As always, we fully support the ongoing efforts of our regulators to examine our conduct and call us to account.” The association, in a letter to regulators, set out the regulatory and other market differences between New Zealand and Australia, and the initiatives the industry was working on to maintain public trust and confidence. Some banks had already taken steps to address issues raised by the Royal Commission, the association said and the industry was committed to continuous improvement.