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[The Wrap] Royal commission? No. But there's still questions to ask

Having just finished reading Adele Fergusson's book, Banking Bad, on the Australian royal commission I am left with these thoughts, observations and comments.

Friday, October 4th 2019, 12:35PM

by Philip Macalister

First up of course is the big question: Do we need a royal commission in New Zealand?

I've come down on the no side; but with appropriate evidence could change my mind. One of the interesting observations is that much of the information Fergusson and her colleagues collected to write their stories and produce TV features on the bad behaviour in Australian financial services came from whistleblowers inside organisations.

My guess is that because we haven't seen the same thing here, then the issues aren't so bad.

There are plenty of journalists in New Zealand which would love to (and attempt to) clobber the financial services industry here.

The other element supporting my position is that New Zealand, although having some shoddy product, didn't have anything to the magnitude of what was being sold in Australia. They had many highly leveraged products which the average investor had no idea about. Indeed there was a raft of shoddy product being flogged by banks and others.

In the years when a lot of the troubles were happening in New Zealand it is clear Australian banks operating over here had sales targets for staff. I know as I saw them with my own eyes.

The recent move by the government to address some of these issues is welcome.

The role of New Zealanders across the ditch

While we hail many Kiwis who have made it to the top in financial services across the ditch reading Banking Bad leaves them tarnished.

Perhaps the most striking in Sir Ralph Norris. He is, to a degree idolised by the business community in New Zealand. However, his reign as CEO of Commonwealth Bank of Australia is hardly one covered in glory.

One New Zealander who appears to come out quite well is ANZ CEO Shayne Elliott.

Throughout Banking Bad CBA arguably comes out as one of the biggest recalcitrants.

One thing which worries me is that ANZ in New Zealand appears to be taking a CBA course and doing many things which build one upon the other.

A phrase which has been relatively new to me is having so-called "tin ears". It's a bit like being tone-deaf and having little appreciation of what has been said.

ANZ's most recent example was it's response to the FMA's investigation into the sale of the former CEO's house to his wife at a discounted price.

How ANZ can defend its position is beyond belief; and then to waste so much of the regulator's time is equally showing a degree of arrogance.

There's plenty of other things to throw into ANZ's basket at the moment. The most recent is Bonus Bonds. For years I've felt this was one of the biggest ripoffs in financial services.

That is a good segue into the role of the regulators in Australia. The Hayne Report was highly critical of the regulators in Australia. 

Making a comparison with New Zealand is a little delicate. 

If there is one obvious area where things could have been better it is letting banks "Hoover" up the large majority of KiwiSaver members with no advice. Issuing a "Guidance Note" is hardly regulation. 

The argument no doubt will go, no harm has been done. I say wait until the markets turn then make that decision. It will be a mess. The mainstream media will have a field-day.

In Australia the narrative was the regulator got too close to the firms it regulated; and was too soft when it came to action time.

The FMA appears to have avoided the first of these. Has it been tough and taken action against the big players when things go wrong? Probably not. Lots of stick waving but not a lot of runs on the board.

And as a final thought. With all this emphasis on responsible investing and assessing companies on ESG (environmental, social and governance) measures, some of these institutions must be uninvestable? Or at least must have been, uninvestable.

Tags: ANZ FMA NZSA Opinion The Wrap

« FMA tackles green-washingFinancial Advice NZ ponders future under new rules »

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