Australia's banking inquiry is devastating. But would NZ fare any better?by Bernard Lagan
Four of the biggest banks taken to task in Australia also operate in New Zealand, yet the Reserve Bank governor sees no need for an inquiry here.
They rubbished calls for the investigation until pressure from MPs forced their hand late last year as a clutch of journalists, led by the Sydney Morning Herald’s Adele Ferguson, kept exposing how the banks’ financial advisers were vaporising the life savings of the vulnerable.
The owlish, slightly built former High Court judge Kenneth Hayne, picked to lead the inquiry, might have been expected to oversee a colourless, if not odourless, probe. He did the opposite. The lawyers and investigators Hayne assembled gained the ammunition to blowtorch bankers, with results including one collapsing in the witness box, others instantly destroying their careers and some becoming so snared in self-serving corporate obfuscation that wells of derision have bubbled up from the audiences.
When AMP’s hapless head of financial advice was asked why the policy to charge clients fees for no services was described by AMP as a mistake – when it wasn’t – he replied, “I think its shows a culture that is not as robust as it should be.”
So vast is the bankers’ habit of gouging fees for services customers never get that AMP and the four biggest banks – ANZ, CBA, NAB and Westpac – have agreed to pay 306,000 customers combined compensation of more than $216 million.
Among the admissions from bankers that have rocked the royal commission’s public hearings:
- A Commonwealth Bank financial advisory business continued to charge fees to customers they knew had died, including one instance where fees were charged for more than a decade.
- The same bank said it would boost 30-year-old roofer David Harris’ credit-card limit by thousands of dollars, adding to his existing debt of more than $27,000, after he told the bank he was a problem gambler.
- Banks sold credit-card payment protection policies to 64,000 people, many of them jobless, who could not claim on the product.
- National Australia Bank staff approved loans they knew were based on fake documents in order to “smash targets” and score bonuses.
Mercifully, Hayne’s first report is free of jargon and hedging. “Why did it happen?” he wrote. “Too often, the answer seems to be greed – the pursuit of short-term profit at the expense of basic standards of honesty. How else is charging continuing advice fees to the dead to be explained?”
The banks, he said, ignored the risks to their reputations, and when shonky practices were exposed, made apologies and promises to do better – and did little else.
New Zealand regulators appear satisfied that what happened in Australia has not been replicated across the Tasman – despite Australia’s four biggest banks holding about 90% of deposits in the New Zealand financial system. “Why search for a problem yet to be identified?” said New Zealand’s Reserve Bank governor, Adrian Orr, airily dismissing the Australian inquiry in April. “I don’t see any lack of confidence in banks in New Zealand.” A week later, he asked the banks to demonstrate how they differed from their Australian parents.
Neither Turnbull nor Morrison saw any banking problem in Australia – until a dogged journalist and unflinching judge showed where the banking regulators either failed or were too scared to look.
Certainly, the banks weren’t going to tell them. And they sure didn’t tell Orr’s banking watchdog counterparts in Australia.
New Zealander Bernard Lagan is the Australian correspondent for the Times, London.
This article was first published in the October 13, 2018 issue of the New Zealand Listener.
Mike White talks to investigator Tim McKinnel, who says police often turn a blind eye to possible corruption out of a misplaced sense of loyalty.Read more
PM Jacinda Ardern has doubled down on her criticism of Australia's deportation policy as "corrosive", ahead of her meeting with Scott Morrison.Read more
Te Aniwa Hurihanganui looks at the outdated Adoption Act and its impact on Māori who grew up desperate to reconnect.Read more
Women with complications caused by deeply embedded vaginal mesh are being helped by a pioneering surgical technique.Read more
North Auckland farmer Fergus Riley has uncovered many important lessons in caring for his father Peter, who has Alzheimer’s.Read more
Instagram is running a social media experiment to see what happens when it hides the number of likes on photos and other posts.Read more
Duncan Smith and Annabel Tapley-Smith weren’t satisfied with producing meat of uncommon quality. So they bought a butchery.Read more
A study on biodegradable plastic bags found they were still intact after three years spent either at sea or buried underground.Read more