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- News & Events
The Government is finally reining in the banking and finance industry. Good news? Yes! Unless you think it’s too little and too late.
Last year, in the wake of Australia’s Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry, our Government set up a review into New Zealand banks. The review was jointly carried out by the Financial Markets Authority and the Reserve Bank of New Zealand. It concluded that there were a few things that needed to be tidied up, such as banks overcharging 431,000 customers to the tune of $23.9 million. And it uncovered some bad behaviour, such as staff being pressured into selling banking products that customers didn’t want or need.
Fingers were wagged. Naughty banks promised not to do it again.
And yet, in May 2019, the Reserve Bank told off ANZ (New Zealand’s biggest bank) and stripped it of the right to self-monitor its capital buffers, having found ‘a persistent failure in its controls and attestation process’ over several years. That’s pretty serious.
Then, at the end of May 2019, ANZ’s Chief Executive David Hisco suddenly took a leave of absence due to ‘ill health’. In the middle of June, he suddenly stepped down. The Chair of the ANZ Board, John Key, said that Hisco had ‘mischaracterised’ his personal expenses for 8 years. He had charged the bank $50,000 to store his wine collection in Australia while he was based in New Zealand. He also used chauffeured cars to ferry himself and his family around. His expenses totalled nearly $450,000 a year, on a salary of $3.395 million in 2018.
But wait, there’s more.
The bank had bought Hisco a nice house in St Heliers for $7.55 million in 2011 and sold it to his wife in 2017 at a $3 million discount on its value – according to QV, which valued it at $10.75 million.
In the end, no one explained whether Hisco had fallen or was pushed, but he received a year’s salary to cushion his fall. Nothing to see here.
Now, Commerce and Consumer Affairs Minister Kris Faafoi has announced a new financial conduct regime. But the Government hasn’t banned cash commissions to insurance salespeople. And it hasn’t even told banks and insurers to act in the best interest of their customers.
Australia’s Royal Commission was broadcast on television live from the courtroom. All over Australia, customers who felt ripped off could watch as chief executives squirmed under questioning. The findings were scandalous. And that’s no exaggeration. Charging dead people for services they were unable to use and over-charging home loan customers for more than 10 years (half a million customers totalling $90 million) were just the start. The banks had also laundered money for drug syndicates and financed terrorism. The Commissioner summed up that basic honesty had been sacrificed for greed. The problems were systemic so the regulator hadn’t done a good job, either.
By contrast, the very gentle review of New Zealand banks concluded things were pretty much OK.
This beggars belief. Our four main banks (Westpac, ANZ, BNZ, and ASB) are all Australian-owned. So are our big insurers. Senior executives move back and forth across the Tasman from one role to the next. Policies and practices in both countries are more likely to be identical than different. Why would the small New Zealand branch of each operation give its customers a better deal than the main part of the business gives Australians?
We also know that insurance commissions paid in New Zealand are the highest in the world. According to NZIER, a staggering $430 million was paid in commissions on $2.57 billion of life-insurance premiums. That’s an average of 23%. In other words, 23% of your money goes to the agent who sold you the policy. And if you’re interested to learn how much the top financial advisers earn in commissions, NZIER provides these figures as well (an astounding $778,000 per annum up to 2015).
And it turns out that Aussie banks charge merchants in New Zealand twice as much in fees on contactless payments (aka paywave) than they do merchants in Australia (that explains all those handwritten ‘no paywave’ stickers on EFTPOS machines up and down the country). Minister Kris Faafoi wrote to Payments NZ in April last year to ask about progress, but since then nothing has happened, so he’s threatening regulation. But it’s all part of a pattern.
Australia’s Royal Commission was triggered by a whistleblower and a journalist. That’s why it was called the Royal Commission into misconduct. There was already a smoking gun.
TOP isn’t alone in thinking New Zealand needs its own Royal Commission on banking, finance, and insurance – veteran journalist Bernard Hickey agrees. We need to work out whether the same behaviour has been going on in New Zealand, and if so, call the industry to account.
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