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.”
| « Enquiry not needed in NZ: ANZ boss | Mann on a mission to diversify financial advice » |
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"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.
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.
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
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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