By Pattrick Smellie
May 2 (BusinessDesk) - The regulators for the banking sector yesterday delivered a sharp message to New Zealand's
largest, mainly Australian-owned banks, to demonstrate clearly why their customers should believe their business
practices differ from their Australian parents, following a string of revelations at an Australian banking royal
commission of inquiry.
The governor of the Reserve Bank of New Zealand, Adrian Orr, and the chief executive of the Financial Markets Authority,
Rob Everett, called representatives of the big banks together in Wellington yesterday, and made personal calls to the
chief executives of those banks to reiterate their message.
Everett told Radio NZ in an interview this morning that: "It’s not credible to just say that New Zealand is different.
You have to demonstrate why either the business structures here, or your business practices here, lead to different
outcomes."
However, there was no need "at this point" for a banking inquiry in New Zealand.
The chair of the Bankers Association of New Zealand, Westpac NZ chief executive David McLean, told RNZ's Morning Report
that bank customers should have faith in New Zealand regulators and the fact that the New Zealand operations of
Australian-owned banks had separate boards of directors, which were stacked in New Zealand residents, and were closer to
their communities and operated a different banking culture.
He implied that ANZ's settlement of the so-called "fair play on fees" test case, in which major banks were accused in a
class action of over-charging for services, had been a move designed to move on from the issue rather than an admission
of fault.
The National Business Review has reported this week that the FMA has instructed ANZ to update statements about conflicts
of interest in its investment disclosure documents after it was revealed it had 'advised' a customer to invest all of a
$450,000 nest-egg in ANZ products.
Said Everett: "What’s been highlighted in the royal commission in Australia is really ugly. I think it’s devastating for
the industry, the stories that are being told."
The FMA was now "spending time here in New Zealand making sure that our work plans react to that and where we’re looking
is somewhat driven by the experience in Australia".
"To date, we haven’t seen any evidence of systemic abuses along the lines of the Australian industry, but as we’ve said
to the New Zealand banks, we can’t afford to be complacent, we really have to up our game to make sure that those same
issues aren’t being replicated here.
"But actually we think the banks need to front up and really explain why it should be different. And that’s the process
that we’re going through with them now.”
The RBNZ and FMA were seeking "assurances, including in writing, as to the processes they’ve followed to check
themselves against what’s coming out of the Royal Commission" and "that they have scrubbed their business models and
that they have a basis for being confident that these issues don’t exist here.”
If banks were insufficiently responsive to the regulators' demands, Everett said "they’ll see more of us in court and
less of us doing the education".
"To date, the trust levels in NZ have been better (than in other jurisdictions), but it will only take one or two big
blow-ups for that to be damaged beyond repair. So we are urging the industry whilst they have the chance to get this
right.”
(BusinessDesk)
ends