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FMA: Show how you're different

It is not enough for the big banks to simply say that New Zealand is different to Australia – they’ll need to explain how, the Financial Markets Authority’s chief executive has said.

Wednesday, May 2nd 2018, 9:15AM 7 Comments

Rob Everett told RNZ the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Australia had produced “ugly” revelations about behaviour in the financial services sector.

“I think it’s devastating for the industry, the stories that are being told. 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,” he said.

New Zealand had not seen any evidence of systemic abuses along the lines of the Australian industry, he said.

“But 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.”

Everett said he and Reserve Bank Governor Adrian Orr had called the bank chief executives to make it clear that they needed to demonstrate why either the business structures here, or your business practices here, lead to different outcomes.

“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.

“We’re asking them to give us assurances, including in writing, as to the processes they’ve followed to check themselves against what’s coming out of the Royal Commission. And as I say, a lot of those issues were well known so they’re not new issues, they should have been checking against them already, we’ve asked them to provide assurances to us, the RB and the FMA, that they have scrubbed their business models and that they have a basis for being confident that these issues don’t exist here.”

Everett said Australia’s Royal Commission “ups the temperature for New Zealand” and put people on notice that the industry needed to get it right.

“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.”

He said he did not think there should be a public inquiry in New Zealand at this point.

“I don’t think so at this point. The government is looking at insurance law, the government’s looking at consumer credit, there’s a financial advice bill going through select committee right now, we’ve got a very transparent work programme as to where in the industry we’re looking for issues. 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 under way make more progress before conclusions are reached.”

Tags: FMA Royal Commission

« Enquiry not needed in NZ: ANZ bossCWG proposals doom independent advisers: Association »

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Comments from our readers

On 2 May 2018 at 9:51 am retired blogger said:
That still sounds to me like Mr Everett is keeping on side with the bankers

Surely he wouldn't be hoping for top bank job down the track now, would he?

We should suspend FSLAB

Have an RC enquiry in NZ just to make sure

and then build a new FSLAB to take into account what the RC finds

and for once and for all, get rid of the pretence that sales of your employer's products is advice

On 2 May 2018 at 10:25 am Chatterbox said:
Indicates FMA and RB do not know what is really going on so asks the Fox in the hen house for a written assurance. Fact is -self-regulation does not work. When the banks have assured there is no concerns or evidence, then and only then our independent project will release the evidence of widespread misconduct, breaches and abuse of the banking system in NZ by the Australian banks in favour of Australia first laws - NZ consumers are fleeced every day on the basis that they trust a bank and its insurance subsidiary that it sells products for. The question is why do regulators and government collude by turning a blind eye despite the continual complaints which are silenced with privacy laws, confidential settlements, and internal complaints processes that close down the matters being aired.
On 2 May 2018 at 11:19 am Ron Flood said:
In case some readers have not seen this article, "Bank staff may be forced to sell debt to customers who can't pay" that appeared on Stuff on June 19 2017.

"Union organiser Tali Williams said it was something the union had been talking to banks about for years. She said staff had reported feeling stressed by sales targets. "It's so unrelenting, they feel pressure to sell products beyond what a customer needs." Williams said that was a concern for customers."

This was not a comment on Australian Bank Staff but our very own New Zealand Bank staff members.

Doesn't happen here, yeah right.
On 2 May 2018 at 12:49 pm Graeme Tee said:
The real issue the FMA and Reserve Bank are dodging here is the extent to which the vertical integration of the banking industry affects the behaviour of bank employees. The excuse that its different in NZ purports to say that human behaviour is different in NZ – clearly we are no different to Australians in this respect.

The concentration of the minds at the FMA and Reserve Bank on trying to root out the actions of a few rogues is a smoke screen to the real issue of what vertical integration leads to. It brings out the worst in human behaviour and leads to poor outcomes for customers.

But, as Rob Everett’s famous “polo shirt” comment shows this is perfectly legal in NZ so its ok. Actually it’s not ok but the FMA and Reserve Bank are right to say we don’t need a Royal Commission because the Australians have shown it’s pretty obvious the sort of behaviour that vertical integration induces. What we need is change to the law – FSLAB has the ability to do this, but it won’t because its is a threat to the banks’ business models. What we do need is a Royal Commission to examine how entrenched regulatory capture has become in NZ and how to avoid it in the future.
On 2 May 2018 at 1:02 pm Skeptical said:
It would be interesting if there was a RC on our shores to see the banks justify their neglect of the 6th step in the advice process. Particularly with insurance.
On 2 May 2018 at 3:16 pm Pragmatic said:
Let’s look at the requirement for a Royal Commission in New Zealand via a differing (and arguably more potent) perspective: self interest

Whether the NZ banks have adopted their parents bad behaviors or not is largely irrelevant. In the eyes of the NZ consumer, NZ banks are guilty as charged. A Royal Commission into the NZ financial services environment would help to clear up any misgivings and reinstate consumer confidence.

One of the findings from the Australian Royal Commission has been that the Regulator (ASIC) has been toothless, and arguably under resourced. This has contributed to many of the “bad guys” being let off the hook with a relative slap on the hand. I would anticipate the regulator receiving a significant boost in funding as part of the ultimate solution.

And finally, if I were a gambler I’d say that it’s a fair bet that the sun is setting on banks embracing a vertically intergrated wealth management (for a variety of reasons, including the PR horrors of the Royal Commission). The ensuing fragmentation of the wealth management industry must be a good outcome for consumers who will be better equipped to identify those parts of the value chain that are important to them
On 2 May 2018 at 4:52 pm Brent Sheather said:
If I was Rob Everett I would throw caution to the wind and say that a Royal Commission in NZ is a good idea. If, as in Australia, the NZ Royal Commission finds fault with vertically integrated providers that will give Mr Everett and the FMA the support they need to start doing their jobs properly. They can throw out the polo shirt statements, define what fair in respect of fees actually means and start putting consumers' interests first. That will improve investor outcomes and ultimately make our industry more sustainable.

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Last updated: 2 December 2018 8:39pm

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