Key’s dual ANZ roles ‘serious mistake’

Having a New Zealand bank’s board chairman on the Australian parent company board has become almost standard practice across the industry but is a serious mistake, one former bank chairman says.

Reserve Bank governor Adrian Orr has raised concerns about Sir John Key holding positions on both the ANZ board in Australia and in New Zealand, where he is chairman.

Orr said that if an Australian parent company got into trouble and a director sat on the Australian and New Zealand boards and the Australian board wanted to bring money back from New Zealand, it would be difficult for a director to act in the best interests of both boards at the same time. A Reserve Bank spokesman said Orr was considering whether it made sense for directors to be able to sit on boards on both sides of the Tasman.

Former BNZ chairman Kerry McDonald said it was a conflict.

‘‘The thing that heightens the conflict is that, based on information on how the banks operate that we have seen in the past 12 months, boards in New Zealand don’t seem to have a clear understanding that they must act in the best interests of New Zealand and not the group as a whole.’’

McDonald said that when he was chairman there was legal advice that it would be a conflict to serve on the parent board so he acted as an adviser in Australia. But it had become common across the industry.

BNZ chairman Doug McKay serves on the Australian board.

‘‘It has almost become standard practice but that is a serious mistake,’’ McDonald said.

Banking commentator David Tripe, from Massey University, said the Reserve Bank could veto Key’s suitability for the ANZ role.

‘‘But what position would the BNZ chair then be in? Why has Orr picked on Key, and not on McKay?

‘‘What about other parent company board members being on New Zealand bank boards?’’ Tripe said.

ANZ spokeswoman Siobhan Enright said the bank was happy to talk with the Reserve Bank but would not comment publicly.

Sam Stubbs, founder of KiwiSaver provider Simplicity, had also previously said the positions were untenable. ‘‘In tough times the Kiwi boards of the Australian banks have to be unambiguously fighting for their Kiwi customers, making sure capital and profits stay in New Zealand, and their customers’ rights and money are protected,’’ he said.

‘‘So it is fair to ask; when the same person sits on New Zealand and Australian boards of a bank, whose interests are they serving?’’

‘‘They must act in the best interests of New Zealand and not the group as a whole.’’ Former BNZ chairman Kerry McDonald

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