Departing financial watchdog Everett proud of laws requiring fair treatment of customers by banks and insurers

Tuesday, 19 October 2021

Outgoing Financial Markets Authority chief executive Rob Everett is proud that planned laws to require banks and insurers to treat customers fairly were a direct result of work done by the FMA and Reserve Bank.

It took banking and insurance scandals in Australia, and “conduct and culture” reviews in New Zealand to get complacent bankers to wake up the way they should be treating their customers, outgoing financial regulator Rob Everett says.

Everett joined as chief executive of the newly-formed Financial Markets Authority (FMA) in 2014, but leaves at the end of the month to to head the government-owned New Zealand Growth Capital Partners venture investment fund.

In a valedictory speech on Tuesday, Everett recalled his surprise in 2014 on arriving from Britain to be told by senior bankers here that he needn’t look for problems at the big end of town.

One bank chief executive even told him the sector was “regulated half to death” in New Zealand, Everett said.

* Laws will levy 'strong' fines on banks, insurers

Financial Markets Authority chief executive Rob Everett and Reserve Bank governor Adrian Orr deliver the findings of their joint review into the conduct and culture of banks in New Zealand. First published in 2018.

* Insurers let down at least 75,000 customers, FMA and Reserve Bank say

At the time British banks were the targets of nationwide fury for irresponsible lending leading to the global financial crisis, selling poor value insurance, and even manipulating interest rates.

But while the British banking scandals did not shake Kiwi bankers' complacency, scandals at their parent banks in Australia did, Everett said.

“It took the Royal Commission in Australia and our conduct and culture reviews with the Reserve Bank to get some parts of the industry to take note.”

Everett said in 2016 he called on the finance industry to embed the concepts of the “interests of the customer” and “integrity” into everything they did.

They didn't listen, he said.

But the scandals in the Australian parent companies of New Zealand banks and insurance companies provided the spark needed for the industry to grasp the threat of a similar royal commission here, he said.

Westpac, ASB, ANZ and BNZ are all owned by Australian parent banks which were shamed in the Australian Royal Commission into their misdeeds in Australia.

But it also sparked Everett and Reserve Bank governor Adrian Orr to launch conduct reviews of banks and insurers, which led to the two sectors admitting multiple instances in which they had failed customers.

The response from politicians was to draft laws requiring banks and insurers to treat customers fairly, and Everett said he was disappointed to be leaving the FMA before they took effect.

The laws were the direct result of the conduct reviews by the FMA and Reserve Bank, he said.

“I regard that legislation as the plugging of an industry-sized hole, in fact two industry sized-holes, in New Zealand’s conduct regulation.”

The two industries were banking and insurance, he said.

The culture reviews had also led to banks and insurers removing, or altering the financial incentives and bonuses they used to drive sales, Everett said.

After the reviews banks stopped selling poor value credit card insurance, but avoided having to make compensation payments to customers, as British banks were forced to do.

The way the banks had responded after the conduct and culture reviews showed that with help, “even the biggest end of town can turn itself around”, Everett said.

He praised banks for their “heroic” customer service during the first national Covid-19 lockdown early last year, when they provided support for tens of thousands of worried households.

“I do not believe that the outrageous misconduct that we saw in Australia is endemic or systemic here,” Everett said.

But he did see sloppiness, lack of resource and conflicted behaviour across the industry.

Banks and insurers were becoming better at identifying, and cleaning up their past mistakes, he said.

“This industry in New Zealand will flourish if it remembers who it serves. That is every man, woman and child in New Zealand.”

Everett was speaking at the Financial Services Council online conference.

Everett was introduced by former Tower chief executive Rob Flannagan who said the finance industry had been in need of a culture reset.

“You leave the position with the respect of the industry,” he told Everett.

“You have taken and influenced the industry to step up to be much more consumer focused, and as a result, we are all better off.”