Bad year to be a banker, though the pay packets weren’t half bad

Sunday, 15 December 2024

ANALYSIS: 2024 was a year of banks getting the bash from traditional friends and enemies alike.

Patience with the big four Australian banks had worn thin indeed in 2023 after the country found itself in the eye of a scamdemic, and banks’ fraud protections for customers were exposed as inadequate.

2024 began as the previous year had ended with unwelcome headlines for the banks.

And it threatened to end the same way, as the Government unveiled a plan earlier this week to beef up Kiwibank, and improve the competitiveness of smaller banks.

January: ‘Secret’ bank fraud communiqué

In January, The Post reported that a secret communiqué sent to banks by the Banking Ombudsman contained “an abundance of clarity” that banks have fallen short on protecting customers from falling victim to investment scams.

Banking expert Janine Starks uncovered the “practice note” that had not been published for the public to see.

The note revealed the ombudsman had alerted banks to fake term deposit scams in March 2023, and had recommended banks provide “clear warnings to customers considering transferring funds for a term deposit”, provide training scripts to frontline staff, and review warnings on their websites, internet banking and app pop-ups.

Starks, who has been helping scam victims fight for compensation, said she had seen no evidence of banks following these recommendations, despite fraud levels reaching epidemic proportions.

The revelation came against a groundswell of public sentiment that banks should be doing more to compensate scam victims in cases where the bank failed to spot a suspicious transaction.

February: Spotlight on ANZ’s span filter

The story rumbled on into February when it was revealed ANZ’s email filters had sent the ombudsman’s fraud note to the bank’s spam folder. A week later they were calling on ANZ chief executive Antonia Watson to leave the ombudsman’s board.

Scam victim Jo Hurley lost money to a fake Citibank investment scheme in April 2023, and had complained to the ombudsman that ANZ should have identified she was being defrauded as the Financial Markets Authority Te Mana Tātai Hokohoko (FMA) had warned about the Citibank scam in July 2022.

ANZ acknowledged it knew about the Citibank scam at the time Hurley was conned.

However, the ombudsman said ANZ did not breach its duty to provide banking services with reasonable care and skill to Hurley, despite its anti-fraud system apparently not being set to scan to for customers entering variations of the name Citibank when making electronic transactions.

Banks continue their attempts to change the narrative on the fraud backlash, with ASB chief executive Vittoria Shortt, speaking after the ASB announced a drop in profits, saying the government must take a leading role in creating, running and funding an anti-fraud centre.

The ombudsman was also accused of “victim-blaming” in February for deciding some victims only deserved compensation for a proportion of their losses.

March: Bank executive alarm at fraud compo calls

Bank executives expressed alarm at the prospect of their employers having to pay compensation for their customers’ scam losses, KPMG says.

KPMG’s 2023 review of banks was published on Wednesday showing bank margins and profits rose again despite the hard times households faced.

But John Kensington, a partner at KPMG, which sells services to banks, said an anonymous survey of bankers revealed a significant increase in cyberattacks and scams.

The executives “noted with some alarm that in some quarters regulators and commentators feel that banks should bear the cost of any scam or fraud regardless of how the customer may have either acted or contributed”, Kensington said.

April: BNZ wears hat of shame

Banking Ombudsman Nicola Sladden’s decision to award 70% compensation to two scam victims who BNZ could have saved were confirmed.

May: Struggling economy, big profits

BNZ unveiled an after-tax profit of $762 million in the six months to the end of March, slightly down on the previous year, but still a long way ahead of its results in earlier years.

Westpac announced an after-tax profit of $477m up on the previous year.

Chief executive Catherine McGrath said the rise in half-year profit reflected the removal of provisions for losses on loans put in place after Cyclone Gabrielle hit the country in February last year.

She acknowledged households were experiencing cost of living challenges as a result of higher home loan rates and inflation.

ANZ reported a modest increase in after-tax profit in the same month.

The big profit announcements came in the same month the Commerce Commission held a banking competition conference in Auckland, where campaigners called for ANZ to be broken up.

On day one, all the big bank chief executives showed up to defend their high profits, but didn’t convince the commission.

The country’s grimly slow progress on open banking got a good airing. Tex Edwards from Monopoly Watch urged the commission to take a hard line with banks, who he said have been moving at a “glacial pace”.

On a positive note, the big banks had been making some progress on lending for development on Māori-owned land.

June: Big bank ‘hubris’ doesn’t impress MPs

The Commerce Commission’s ongoing market study into competition in retail banking wasn’t the only banking inquiry going on.

The Primary Production select committee was holding its own having been alarmed at some of the things farmers had been telling its members.

The big banks didn’t bother to send their chief executives, and the move back-fired, with MPs failing to find bank lobbyists’ assertions that they were the “trusted advisers” to farmers convincing.

“Across the Parliamentary divide there was universal agreement that the banks appear to have a degree of hubris, or self-congratulation,” Mark Cameron, chair of the committee said.

Later the same month, Finance Minister Nicola Willis announced a wider Parliamentary banking inquiry would take place.

July: The rise of the neo-banks begins… maybe

One of the great hopes of the Commerce Commission is that open banking fintech companies will launch against the banks, filling the role taken by neo-banks overseas like Starling and Revolut.

July saw Dosh announce it would seek a banking licence. December would see Revolut announce it would follow suit.

August: National plan to disrupt bank’s ‘cosy oligopoly’

The full extent of the National-led Government’s intent to disrupt the banking sector was emerging; beefing up Kiwibank, and getting the Reserve Bank Te Pūtea Matua to start factoring competition into its thinking.

It’s fair to say some anti-monopolists saw more than a bit of theatre in the public statements, however.

August also saw the Commerce Commission publish its recommendations for reform of the banking sector to boost competition, giving the banks another swipe for having gone too slow on open banking.

Kiwibank rounded the month out with a 15% increase in profit.

September: Parliamentary banking inquiry begins

The month started with the Government opening a consultation into measures to force big banks to quickly implement open banking, saying New Zealand had fallen behind not only developed countries, but also countries in the developing world.

While banks may have underinvested in technology despite their huge profits, that one was really on previous governments for failing to hold the sector to account, and to quickly enough complete enabling legislation, like a consumer data right.

October: Focus moves onto banks and climate

ASB was the first big bank to make headlines in October when it faced legal action from the Financial Markets Authority (FMA) Te Mana Tātai Hokohoko for allegedly making false or misleading representations in relation to insurance products.

Westpac was the second, targeted by shareholder activists concerned it was not living up to its public pledges on reducing emissions. ANZ would experience the same criticism in November.

In October, MPs started their select committee banking inquiry for real, and testimonies from farmers revealed they felt unloved and overcharged by banks, and were restricting lending to the sector.

One farmer went so far as to say banks were “running the country”, not the Government.

Bank chief executives appeared to defend their banks. ANZ went first, but while MPs seemed under-prepared at first, they quickly improved in their lines of questioning.

November: Big bank ‘climate dishonesty’ revealed

More banks appeared before the select committee just after revealing large profits that defied economic conditions that beset other businesses and households, and large paypackets for their chief executives.

Westpac went first with a $1 billion profit, up 10%, and then BNZ followed suit with a $1.5b profit, and ANZ reported an after-tax “cash” profit of $2.29b, up 1% on the previous year.

The month also saw ASB temporarily shutting bank branches over its KiwiSaver scheme’s investment in companies linked with the establishment and running of illegal settlements by Israel in the Palestinian Occupied Territories, although other banks had similar investments too.

It then emerged that some of the big banks were setting lower emissions reduction targets for Australian dairy farmers than for Kiwi dairy farmers. Only ANZ did not, saying there the bank did not see a clear pathway for farmers to reduce emissions. Westpac was accused of “climate dishonesty” at the banking inquiry.

December: Government unveils plan

The Government announced plans to use KiwiSaver to capitalise Kiwibank to compete with the big banks, and make the Reserve Bank Te Pūtea Matua remember competition when setting rules for banks.

Federated Farmers also had a crack at banks again, revealing that banks had put in place a 2030 plan to stop lending to petrol retailers, despite the country having no plans to stop using petrol by then.

It was not the first time the concern had been raised. In October, petrol retailer Waitomo had revealed banks’ attitude to MPs.