Warning to NZ's Aussie-owned banks: Prove we can trust you
Banks here have been told to prove to authorities they are not behaving like their Australian counterparts who've been caught out ripping off customers.
The bosses of New Zealand's Australian-owned banks have been told by the Financial Markets Authority and Reserve Bank to prove they are not abusing customers' trust.
In the wake of shocking revelations from the Australian Royal Commission on banking, the FMA's chief executive Rob Everett has revealed that on Tuesday he called the New Zealand chief executives of the big Australian-owned banks together, alongside Adrian Orr, governor of the Reserve Bank.
Everett wanted more details on how they were different to their Australian parent banks, whose lending and financial advice businesses have been scrutinised and found wanting in Australia.
"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," Everett said, speaking on RNZ's Morning Report.
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"Now we at the FMA, we see some of that. 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."
"What's been highlighted in the royal commission in Australia is really ugly," he said.
NZ banks are asked to explain how they're different to their Australian parent banks.
"I think it's devastating for the industry, the stories that are being told," Everett said. "Most of the issues that we've heard are issues that were well known to the regulators, they are issues that have surfaced before.
"So we have been 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."
Everett said that "to date we haven't seen any evidence of systemic abuses along the lines of the Australian industry".
David McLean, chairman of the New Zealand Bankers Association told RNZ that holding a royal commission on banking in New Zealand would be "a huge waste of time and money".
Financial Markets Authority boss Rob Everett warns banks the regulator would act if Australian-style banking abuses emerged.
"In Australia, the banking royal commission was established after several years of revelations of widespread abuse of customers in several aspects of financial services. This just hasn't happened here," he said.
"What we have seen in New Zealand is there is no evidence of anywhere near the same level of problems as we saw in Australia," McLean said.
McLean also sought to portray the New Zealand banking sector "staffed by Kiwis" as being different from the Australian banking sector culture.
He said New Zealand banks were very willing to provide any proof the FMA and Reserve Bank that there was no Australian-style problem in New Zealand banking.
Everett said: "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."
Westpac New Zealand chief executive David McLean says it is pleasing to see plenty of activity in the regions, which are the "engine room of the New Zealand economy".
Everett said he was seeking assurances, "including in writing," about the processes they had followed regarding the scandals coming out of the Royal Commission.
He warned the banks that the regulator would act if Australian-style banking abuses emerged.
"If we see areas where we think the law has been breached or the conduct is really poor, we will go after it.
"We are also spending a lot of time pushing and influencing and urging the providers just as a matter of best practice to think harder about what the customers need and less about their bottom line."
But Everett said he did not think New Zealand needed a royal commission on banking of its own, especially as New Zealand was in the middle of overhauling its financial conduct laws.
"I would rather let that work progress before anyone leaps to any conclusions about whether or not to have an inquiry.
"I'd also add the Australian inquiry has only been going a few weeks. The initial report isn't out until September, the final report isn't out until February. I think rather than rushing to conclusions I'd like to let the work that's currently underway make more progress before conclusions are reached."
He expected the banks to co-operate with the FMA's inquiries.
"I think with Adrian Orr and I it was pretty clear certainly to the banks we spoke to yesterday that this was a game changer."
A poor response from the banks would lead to a tough reaction.
"If they do that, they'll see more of us in court and less of us doing the education."
He said: "Trust is absolutely damaged in Australia, it was damaged in the UK, you can see it is damaged in the US.
"To date, the trust levels in New Zealand have been better, 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."
- Stuff
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