First ANZ. Now BNZ: The time is now for a royal commission on banking

Saturday, 3 August 2019

National Australia Bank chief Andrew Thorburn says the royal commission made him re-evaluate at the bank's values.

OPINION: 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 catch-up 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.

**READ MORE:

* BNZ's $100m Foodstuffs stuff-up

* Behind the BNZ veil

* Inside NAB's toxic banking culture

* BNZ 'ruthlessly vigilant' in deserving customer trust, Mentis says

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

* BNZ chief executive handing over to bank's first female leader**

Here in New Zealand, revelations that ANZ can't keep control of its chief executives' 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 it's IT systems were in a mess.

And this comes on 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 Australian-owned 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.

Wai Campbell, daughter of the late Maria Wera Campbell, has taken a complaint against ANZ over changes made to her mother's banking the day before she died.

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 spend around $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 the 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.

The Financial Markets Authority chief executive Rob Everett (Left) and The Reserve Bank of New Zealand Governor Adrian Orr deliver the findings of their joint review into the conduct and culture of banks in New Zealand.

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.

Sir John Key is a hero of the National Party, and chairman of ANZ bank in New Zealand.

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 banks' staff), and it did conclude that some dubious things were going on.

Banks had under-invested 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 this could be a one-term government, and we enter a new era of bank-friendly National-led rule.

We are well into a very Kiwi 10-year journey to get the shonk 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 do-nothing Securities Commission in 2011 to create the FMA, and under the current government are moving to fast track 'conduct' laws for the banks.

All profit and no smiles. Ken Henry, NAB's former chairman, left the bank after the Australian Royal Commission. Having bankers mea culpa's enter a country's collective consciousness is important.

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 surfaced a great deal that was not known, and left the banks under no doubts the storm would not all blow over, and they could go back to the profits-friendly status quo of don't ask-don't tell.

And that's precisely why we need one here.

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 Aussie 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?