“PM: If banks won’t act lift game, we’ll act”. So read the headline in Tuesday’s NZ Herald.
Sounds as if the government is on the job, although the underline was a bit more cautious: “Ardern’s stern words stop short of saying customers ripped off”.
So what was the headmistress on about? Surely she wasn’t saying the Reserve Bank (a key regulatory agent in the banking sector) needs a rev up?
Or is it that KiwiBank needs to lift its game?
Possibly. KiwiBank hasn’t been the raging success its founder, the late Jim Anderton, thought or hoped it would be.
How about the other NZ-owned banks like TSB or Heartland?
There was no mention of them directly.
Could the target have been the ANZ, ASB, BNZ, and Westpac (all Australian-owned and the heavyweights of the banking industry in this country), whose combined profit came to $4.9bn, after tax, in the year to December 31, 2017?.
But only last week the Deputy Prime Minister, Winston Peters, was citing the profit ANZ made in this country as a sign of the strength of the economy.
Does the coalition government, when it talks of “banks needing to lift their game”, think profits should be even bigger?
Point of Order finds that a bit of a stretch. and concludes that Ardern was just having a whack at the banks because she thinks the punters hate any business being successful and making a decent profit.
What triggered it all was a report following a four-month review and costing around $2m by the Financial Markets Authority and the Reserve Bank of NZ into the conduct and culture of 11 banks operating in NZ.
Why these institutions needed to do a review — isn’t it their daily job to monitor the activity of financial operators? — presumably was to be seen to be doing something in the wake of the Royal Commission into Banking across the Tasman.
But as economist Michael Reddell pointed out in his blog, the main finding of the FMA and the RBNZ was: “ … culture and conduct issues do not appear to be widespread in banks in New Zealand at this point in time”.
Despite that, the NZ Herald’s business commentator thought it was a “a wake up call” for the banks.
So what are the banks being told they have to do? Boards must give “serious attention” to how they oversee and monitor conduct issues and do so “urgently”.
Reserve Bank governor Adrian Orr says banks “had a responsibility” to ensure customers receive products and services they understand.
Or, as somebody said a long time ago, caveat emptor.
When politicians start playing politics over the country’s major financial insititutions, they are playing with fire. The banks are pillars on which the foundations of the economy rest. When any of them fall, as some did to precipitate the global financial crisis, the repercussions reverberate for decades.
Not surprisingly, the FMA and the Reserve Bank think they should have more powers to regulate the banks.
What perhaps should be an immediate priority is to apply more rigorously the core responsibilities which already have been assigned to them by law.
As Michael Reddell argued, developing a culture of doing excellently what Parliament asked them to do, of being open and accountable to citizens, and avoiding overreaching their mandate (relying on implicit threats) would be good to see from both the Reserve Bank and the FMA.
Back to Ardern: she said the government would “look hard” at the industry but did not want to nominate it for a Commerce Commission market study.
Ah, so the banks unlike those petrol resellers, are not “fleecing” their customers.
But, a final warning, “Banks should remember that it is a privilege, not a right, to operate, and customer needs must come first”.
Just don’t expect a chocolate biscuit when the ATM spits out your cash.