Banks get reprieve to fix culture problems

Insight

New Zealand’s Finance Minister Grant Robertson has decided to take a wait-and-see approach to the outcomes of an inquiry into the conduct and culture of the banking sector.

The Reserve Bank and the Financial Markets Authority published its report this week showing there are definitely problems in the sector, including $24 million of over-charging of customers.

However, the regulators admit they “did not undertake a detailed investigation of how banks ensure that products and services, including lending, are suitable for their customers.”

This inquiry is less rigorous than the Australian Royal Commission into misconduct in the banking and financial services across the Tasman and some have deemed it as weak. Mr Robertson is watching closely.

The banks in New Zealand now have a chance to put things right and start self-regulating, or it will be done for them. This explains why ANZ Chairman Sir John Key got out of the blocks early, calling for tougher rules to keep everyone in line.

Regardless of the rules, there will need to be a culture change, as discussed in our previous article on the issue.

The stakes are incredibly high, with plummeting trust and confidence in our most important institutions. If ever there were a time to put matters right, it’s now.

This will require honesty about the problems inherent in leadership behaviours, the need to develop robust policies and, most importantly, to enforce those policies when they’re breached.

Policies count for nought unless they’re upheld and seen to be upheld.

Mr Robertson will be hoping for a positive response from finance sector leaders.