1 00:00:05,760 --> 00:00:06,160 Speaker 1: Gielda. 2 00:00:06,240 --> 00:00:09,399 Speaker 2: I'm Chelsea Daniels and this is the Front Page, a 3 00:00:09,560 --> 00:00:18,040 Speaker 2: daily podcast presented by the New Zealand Herald. An inquiry 4 00:00:18,079 --> 00:00:22,720 Speaker 2: into New Zealand's banking competition or lack thereof, is currently 5 00:00:22,800 --> 00:00:27,080 Speaker 2: under way. Finance Minister Nikola Willis announced it in June, 6 00:00:27,440 --> 00:00:32,360 Speaker 2: putting particular emphasis on rural banking and lending. A ComCom 7 00:00:32,400 --> 00:00:37,120 Speaker 2: market study has already, unsurprisingly found a lack of competition 8 00:00:37,200 --> 00:00:41,480 Speaker 2: among our largest financial institutions, with a full report due 9 00:00:41,520 --> 00:00:46,239 Speaker 2: next month. So what does it all mean for the 10 00:00:46,320 --> 00:00:49,320 Speaker 2: average kei we consumer and is their hope on the 11 00:00:49,360 --> 00:00:53,000 Speaker 2: horizon for some healthy competition. Later on the Front Page, 12 00:00:53,120 --> 00:00:57,520 Speaker 2: ABC journalist Dan Zipper explains what lessons could be learned 13 00:00:57,640 --> 00:01:02,720 Speaker 2: from Australia's massive royal mission into banking. But first, Victoria 14 00:01:02,840 --> 00:01:07,480 Speaker 2: University of Wellington Associate Professor of Economics, Martin Lubrink is 15 00:01:07,520 --> 00:01:10,120 Speaker 2: with us to take us through the state of our 16 00:01:10,200 --> 00:01:17,640 Speaker 2: banking sector. Martin, can you explain to us what New 17 00:01:17,720 --> 00:01:20,840 Speaker 2: Zealand's banking landscape looks like at the moment? 18 00:01:21,160 --> 00:01:23,959 Speaker 3: Well, the banking landscape at the moment looks very concentrated. 19 00:01:24,000 --> 00:01:27,319 Speaker 3: There's four big banks and then there is a handful 20 00:01:27,360 --> 00:01:30,959 Speaker 3: of smaller banks. That is not atypical. It's normal in 21 00:01:31,000 --> 00:01:33,840 Speaker 3: many countries like France and the Netherlands. They also have 22 00:01:33,959 --> 00:01:38,280 Speaker 3: concentrated banking landscape with a few dominant players. What is 23 00:01:38,319 --> 00:01:40,600 Speaker 3: typical here, I think is that the profitability of the 24 00:01:40,680 --> 00:01:43,360 Speaker 3: large banks very high, where does the profitability of the 25 00:01:43,400 --> 00:01:46,680 Speaker 3: smaller banks is low, and I think that creates a 26 00:01:46,720 --> 00:01:47,440 Speaker 3: bit of tension. 27 00:01:47,960 --> 00:01:51,960 Speaker 2: Our competition watchdog, the Commerce Commission, released its draft report 28 00:01:52,080 --> 00:01:55,280 Speaker 2: into the state of Personal Banking in New Zealand earlier 29 00:01:55,280 --> 00:01:59,120 Speaker 2: this year. Does that offer any solutions to our banking 30 00:01:59,200 --> 00:01:59,840 Speaker 2: woes here? 31 00:02:00,200 --> 00:02:02,280 Speaker 3: Well, I think it's a good study, and in terms 32 00:02:02,320 --> 00:02:05,160 Speaker 3: of solutions, there are some solutions that I would support 33 00:02:05,240 --> 00:02:08,520 Speaker 3: the particularly when it comes to open banking and innovations 34 00:02:08,919 --> 00:02:12,480 Speaker 3: and things that can improve the banking experience for customers 35 00:02:12,480 --> 00:02:15,800 Speaker 3: and also for businesses. But these are recommendations appearing at 36 00:02:15,800 --> 00:02:19,160 Speaker 3: the end of the report, whereas the main recommendations are 37 00:02:19,240 --> 00:02:22,359 Speaker 3: very much focused on helping the smaller banks. And I 38 00:02:22,800 --> 00:02:26,040 Speaker 3: struggle with that a bit because the smaller banks, they're 39 00:02:26,080 --> 00:02:29,240 Speaker 3: kind of vulnerable and to expect a lot of solutions 40 00:02:29,240 --> 00:02:32,640 Speaker 3: from them, whereas the bigger banks are much more powerful 41 00:02:32,720 --> 00:02:35,240 Speaker 3: or stronger and much more resilient. It's kind of asking, 42 00:02:35,560 --> 00:02:37,839 Speaker 3: you know, the mouse to be the elephant, and that's 43 00:02:37,880 --> 00:02:40,160 Speaker 3: a bit of a concern in my view. 44 00:02:40,400 --> 00:02:43,239 Speaker 2: Is it an issue that are four major banks that 45 00:02:43,240 --> 00:02:44,880 Speaker 2: all Australian owned. 46 00:02:45,120 --> 00:02:47,760 Speaker 3: I'm not to worry about the ownership of the Australian banks. 47 00:02:47,760 --> 00:02:50,960 Speaker 3: Also because there's good cooperation between the Reserve Bank as 48 00:02:51,000 --> 00:02:55,440 Speaker 3: a prudential supervisor and the opera the Australian prudential supervisors, 49 00:02:55,480 --> 00:02:58,720 Speaker 3: so you know, the communications is easy and it flows easily. 50 00:02:58,760 --> 00:03:00,359 Speaker 3: I think, you know, it would be different and if 51 00:03:00,360 --> 00:03:03,720 Speaker 3: it were a Latin American bank or maybe a Southeast 52 00:03:03,720 --> 00:03:07,680 Speaker 3: Asia located bank, where you probably have a different supervisiony culture. 53 00:03:07,960 --> 00:03:10,440 Speaker 3: The supervision culture in Australia and New Zealand is very 54 00:03:10,600 --> 00:03:13,959 Speaker 3: similar my guesses, and also similar to other very resilient 55 00:03:13,960 --> 00:03:16,760 Speaker 3: countries like Canada. And so these countries in Australia and 56 00:03:16,760 --> 00:03:19,639 Speaker 3: New Zealand and Canada have amongst the saving banking systems 57 00:03:19,639 --> 00:03:22,400 Speaker 3: of the world. It's well documented. But nevertheless you'll just 58 00:03:22,400 --> 00:03:26,320 Speaker 3: four big Australian banks that have a strong influence here 59 00:03:26,360 --> 00:03:28,040 Speaker 3: on the market. Yes, that's true. 60 00:03:28,160 --> 00:03:31,280 Speaker 2: How could the government better capitalize smaller banks? 61 00:03:31,520 --> 00:03:33,000 Speaker 1: Say like Kiwi Bank. 62 00:03:33,240 --> 00:03:35,520 Speaker 3: That's a tricky one because it's not the role of 63 00:03:35,520 --> 00:03:39,120 Speaker 3: the government to proper banks or to capitalize them, because 64 00:03:39,160 --> 00:03:41,640 Speaker 3: that creates all sort of what they call moral hazard issues, 65 00:03:41,680 --> 00:03:44,960 Speaker 3: in the sense that if suppose that Kiwi Bank gets 66 00:03:44,960 --> 00:03:48,520 Speaker 3: more capital and starts becoming the really disruptor bank, it 67 00:03:48,560 --> 00:03:52,720 Speaker 3: may start making risky bats and start gambling with that money, 68 00:03:53,000 --> 00:03:55,440 Speaker 3: and then you have a well capitalized bank that gambles 69 00:03:55,480 --> 00:03:58,320 Speaker 3: with money, but that nevertheless can go sideways in a 70 00:03:58,400 --> 00:04:01,320 Speaker 3: very bad way. So it's tricky to expect the government 71 00:04:01,360 --> 00:04:04,120 Speaker 3: to step in, and it's also very hard to require 72 00:04:04,360 --> 00:04:06,720 Speaker 3: or to fund the other banks. The smaller banks will 73 00:04:06,720 --> 00:04:09,080 Speaker 3: recaplize them through the state, because that's a bailout in 74 00:04:09,080 --> 00:04:10,880 Speaker 3: one way, shape or form, and that is never good 75 00:04:10,920 --> 00:04:13,600 Speaker 3: because if that fails, what do you do? Then if 76 00:04:13,600 --> 00:04:15,720 Speaker 3: it's success, then the question is when to step out. 77 00:04:16,040 --> 00:04:19,280 Speaker 3: So that creates more messiness than actually it does help 78 00:04:19,560 --> 00:04:20,360 Speaker 3: solve problems. 79 00:04:20,560 --> 00:04:24,320 Speaker 2: The inquiry launched by Finance Minister Nikola Willis will look 80 00:04:24,360 --> 00:04:28,040 Speaker 2: into competition but also rural banking and lending. 81 00:04:28,200 --> 00:04:29,080 Speaker 1: What does that all mean? 82 00:04:29,320 --> 00:04:32,280 Speaker 3: Well, I think them inquiry was very much focused on 83 00:04:32,360 --> 00:04:34,920 Speaker 3: retail banks and that's only half of the picture and 84 00:04:35,080 --> 00:04:38,560 Speaker 3: my justice. When it comes to retail banking, there is competition. 85 00:04:38,680 --> 00:04:41,080 Speaker 3: You know, maybe the competitions are not as strong as 86 00:04:41,120 --> 00:04:43,800 Speaker 3: people would expect it, but if you go around for 87 00:04:43,839 --> 00:04:46,640 Speaker 3: a mortgage, you will find good deals offered by various banks. 88 00:04:46,680 --> 00:04:49,240 Speaker 3: So people are very well informed about what is available 89 00:04:49,279 --> 00:04:52,839 Speaker 3: for retail mortgages and they will play banks against each other. Now, 90 00:04:52,839 --> 00:04:55,960 Speaker 3: maybe that's not perfect in the commissioned way, and it 91 00:04:55,960 --> 00:04:58,719 Speaker 3: could be better, but when it comes to lending to 92 00:04:58,760 --> 00:05:01,839 Speaker 3: the small and medium sized or the agre sector, it 93 00:05:01,960 --> 00:05:04,160 Speaker 3: is far more opaque in terms of what the best 94 00:05:04,200 --> 00:05:07,080 Speaker 3: deals are because they're all bespoke deals. There's not a 95 00:05:07,120 --> 00:05:10,600 Speaker 3: lot of advertising. The market is very intransparent, and that 96 00:05:10,640 --> 00:05:14,000 Speaker 3: creates opportunities to extract more profits from borrowers. 97 00:05:15,760 --> 00:05:18,280 Speaker 4: Farmers and others in the primary sector have told us 98 00:05:18,279 --> 00:05:22,080 Speaker 4: that access to borrowing has become more difficult, that farmers 99 00:05:22,080 --> 00:05:24,560 Speaker 4: are paying higher interest rates compared to other borrowers. 100 00:05:24,800 --> 00:05:28,000 Speaker 5: Their history has shown us that leading to businesses incloding. 101 00:05:28,000 --> 00:05:31,000 Speaker 5: The egg rey sector is riskier than leanding to homeowners, 102 00:05:31,520 --> 00:05:33,680 Speaker 5: and as a result, we do hold twice as much 103 00:05:33,760 --> 00:05:36,880 Speaker 5: capable against an eggry line is a prime line. 104 00:05:38,920 --> 00:05:41,440 Speaker 3: So I think it's good to have another inquiry that 105 00:05:41,480 --> 00:05:44,440 Speaker 3: looks in particular into that sector, these small and medium 106 00:05:44,480 --> 00:05:47,479 Speaker 3: sized firms in the augre sector, because there's probably where 107 00:05:47,560 --> 00:05:50,400 Speaker 3: the gains are made for the commercial banks, but we 108 00:05:50,440 --> 00:05:52,520 Speaker 3: don't know. I haven't seen the report, but from the 109 00:05:52,520 --> 00:05:55,320 Speaker 3: start with the Commerce Commission report focusing on retailers, I 110 00:05:55,320 --> 00:05:57,080 Speaker 3: feel like, you know, yeah, that's more or less looking 111 00:05:57,080 --> 00:05:59,280 Speaker 3: for your keys onder the lamppost and you know, if 112 00:05:59,320 --> 00:06:01,360 Speaker 3: you go through the part of the Commerce Commission, they 113 00:06:01,440 --> 00:06:04,320 Speaker 3: noticed there is some competition, whereas I'm not sure what's 114 00:06:04,320 --> 00:06:07,960 Speaker 3: happening in the SME market or the business market for lending. 115 00:06:08,200 --> 00:06:10,160 Speaker 3: Neither do I have a good idea what's going on 116 00:06:10,200 --> 00:06:12,599 Speaker 3: within the harky business lending. So there's you know, I 117 00:06:12,600 --> 00:06:14,599 Speaker 3: think it's very good to have that report to show 118 00:06:14,640 --> 00:06:16,680 Speaker 3: the other side of lending and boring and that part 119 00:06:16,720 --> 00:06:18,320 Speaker 3: of the market, because that gives it a far better 120 00:06:18,360 --> 00:06:20,680 Speaker 3: view of what's going on in banking here in New Zealand. 121 00:06:20,800 --> 00:06:23,040 Speaker 2: Isn't it true that there is a lack of competition 122 00:06:23,120 --> 00:06:26,200 Speaker 2: because those four banks do own up to say, ninety 123 00:06:26,240 --> 00:06:31,440 Speaker 2: percent of the sector in New Zealand. Does that discourage 124 00:06:31,480 --> 00:06:34,839 Speaker 2: them from say, investing in things like security measures for 125 00:06:34,960 --> 00:06:37,200 Speaker 2: customers and doing other things like that. 126 00:06:37,480 --> 00:06:39,680 Speaker 3: Yeah, I'm not saying that there's a lack of competition 127 00:06:39,880 --> 00:06:42,480 Speaker 3: because you know, you can do shopping and the report 128 00:06:42,520 --> 00:06:45,080 Speaker 3: in the Commerce Commission notice is that there are deals 129 00:06:45,080 --> 00:06:48,040 Speaker 3: to be had. You can get favorable deals, although it's 130 00:06:48,040 --> 00:06:50,640 Speaker 3: not perfect. I mean, yes, you know there is some competition, 131 00:06:50,720 --> 00:06:53,360 Speaker 3: but it could be sharper. But you know, in circumstances 132 00:06:53,400 --> 00:06:55,159 Speaker 3: like this, I wouldn't worry too much about that. 133 00:06:55,240 --> 00:06:56,080 Speaker 1: But I agree with you. 134 00:06:56,240 --> 00:06:58,600 Speaker 3: The last point in particular is that give that the 135 00:06:58,600 --> 00:07:00,839 Speaker 3: banks are very profitable, in particularly the larger one, They're 136 00:07:00,920 --> 00:07:02,920 Speaker 3: very profitable. You know, there's no doubt about that. It has 137 00:07:02,880 --> 00:07:06,159 Speaker 3: been well documented. And then to see the services provided 138 00:07:06,200 --> 00:07:09,200 Speaker 3: in terms of technology and support, and also the risks 139 00:07:09,200 --> 00:07:11,640 Speaker 3: that are imposed on customers when things go wrong, I 140 00:07:11,640 --> 00:07:13,400 Speaker 3: think there is a lot of gains to be made. 141 00:07:13,760 --> 00:07:16,400 Speaker 3: You know, hotter stories about people being scammed. And then 142 00:07:16,440 --> 00:07:18,040 Speaker 3: I think, you know, as far as I know most 143 00:07:18,040 --> 00:07:20,559 Speaker 3: of these cameras, the cost of these scams are upon 144 00:07:20,600 --> 00:07:22,440 Speaker 3: you and me, Whereas I think you know, the better 145 00:07:22,440 --> 00:07:24,560 Speaker 3: informed party and the stormer party is the bank, and 146 00:07:24,600 --> 00:07:26,520 Speaker 3: they should have systems in place to prevent that. 147 00:07:26,920 --> 00:07:31,200 Speaker 2: Well, New Zealand's currently looking at introducing confirmation of PAYE, 148 00:07:31,400 --> 00:07:34,600 Speaker 2: which essentially is the ability right for customers to check 149 00:07:34,640 --> 00:07:37,720 Speaker 2: the account owner's name and account number and make sure 150 00:07:37,720 --> 00:07:40,480 Speaker 2: they match before they make a payment. The fact that 151 00:07:40,560 --> 00:07:43,560 Speaker 2: this is available over season is only something that we're 152 00:07:43,560 --> 00:07:44,080 Speaker 2: looking at. 153 00:07:44,200 --> 00:07:44,560 Speaker 4: Now. 154 00:07:44,960 --> 00:07:47,640 Speaker 2: Does that mean that we are quite behind in those 155 00:07:47,680 --> 00:07:49,160 Speaker 2: protections for customers? 156 00:07:49,600 --> 00:07:51,840 Speaker 3: Yes, I would say so we're lagging and the incentives 157 00:07:51,880 --> 00:07:54,320 Speaker 3: to improve are not there. A lot of the innovations 158 00:07:54,320 --> 00:07:56,880 Speaker 3: are in the European market. You know, the US market 159 00:07:56,920 --> 00:07:59,040 Speaker 3: is even more backward than ours. They still work with 160 00:07:59,160 --> 00:08:01,680 Speaker 3: checks and some You cannot transfer money from one small 161 00:08:01,680 --> 00:08:03,360 Speaker 3: bank to the other small bank in US, so that's 162 00:08:03,360 --> 00:08:06,320 Speaker 3: a very different territory. But Europe has a pretty advanced 163 00:08:06,320 --> 00:08:08,000 Speaker 3: and I think Australia as well, but in particular Europe 164 00:08:08,040 --> 00:08:11,280 Speaker 3: has a very advanced or pretty advanced banking system where 165 00:08:11,320 --> 00:08:14,000 Speaker 3: you have real time online payments, so you transferm money 166 00:08:14,040 --> 00:08:16,760 Speaker 3: and then within seconds it's at the receiving bank and 167 00:08:16,800 --> 00:08:19,760 Speaker 3: you have number confirmation to make sure that the person 168 00:08:19,840 --> 00:08:21,280 Speaker 3: you pay to is the right person. 169 00:08:21,360 --> 00:08:23,160 Speaker 1: So yes, you know we're behind, and. 170 00:08:23,160 --> 00:08:24,360 Speaker 3: So if you look at it, you think like, you know, 171 00:08:24,640 --> 00:08:26,360 Speaker 3: there's all these profits made by the banks, and if 172 00:08:26,360 --> 00:08:28,400 Speaker 3: there's the Reserve Bank or the Minister of Finance or 173 00:08:28,440 --> 00:08:31,600 Speaker 3: whoever is in charge, can tell these banks like, you know, yes, 174 00:08:31,800 --> 00:08:34,480 Speaker 3: it's fine that you're working in a profitable sector, but 175 00:08:34,559 --> 00:08:36,480 Speaker 3: we expect more of you in terms of service. 176 00:08:36,720 --> 00:08:39,120 Speaker 1: I would really encourage that, you know, top. 177 00:08:38,920 --> 00:08:42,040 Speaker 3: Down approach to forcing the larger banks in particular to 178 00:08:42,360 --> 00:08:45,679 Speaker 3: offer better services. Whereas the Comcoman report focuses very much 179 00:08:45,720 --> 00:08:48,160 Speaker 3: on the solid banks, most of the innovations has to 180 00:08:48,200 --> 00:08:51,439 Speaker 3: come from the larger banks, and the larger banks are profitable, 181 00:08:51,559 --> 00:08:54,439 Speaker 3: so regulation can be written in such way that they 182 00:08:54,520 --> 00:08:58,040 Speaker 3: prescribe these innovations to be implemented in New Zealand. 183 00:08:58,200 --> 00:09:01,679 Speaker 2: And of course there was the Royal Commission into Banking 184 00:09:01,720 --> 00:09:05,880 Speaker 2: in Australia five years ago. Now do we need something 185 00:09:06,000 --> 00:09:08,680 Speaker 2: like that or are there lessons to be learned from 186 00:09:08,720 --> 00:09:11,000 Speaker 2: the Royal Commission over in Australia. I know that there 187 00:09:11,040 --> 00:09:13,720 Speaker 2: was a completely different set of circumstances that led to 188 00:09:13,760 --> 00:09:17,360 Speaker 2: that Royal Commission, But what can we learn from that hard. 189 00:09:17,200 --> 00:09:19,839 Speaker 3: To say because shortly after the Royal Commission came out 190 00:09:19,880 --> 00:09:22,040 Speaker 3: with their report, the FMA and the Reserve Bank did 191 00:09:22,040 --> 00:09:24,680 Speaker 3: a similar report, and then that report shows nothing to 192 00:09:24,679 --> 00:09:26,719 Speaker 3: be seen here, and so we have to take their 193 00:09:26,720 --> 00:09:29,199 Speaker 3: words for it that it's true. So there's not immediately 194 00:09:29,240 --> 00:09:32,439 Speaker 3: the issue that we saw in Australia where mortgages were 195 00:09:32,440 --> 00:09:35,120 Speaker 3: given to people that didn't exist, and where the emphasis 196 00:09:35,120 --> 00:09:37,800 Speaker 3: on sales were so hard that bad behavior starts happening. 197 00:09:38,160 --> 00:09:40,720 Speaker 3: Occasionally hear stories here in New Zealand what's happening, but 198 00:09:40,760 --> 00:09:42,960 Speaker 3: it's not well documented and so I'm not sure what 199 00:09:43,040 --> 00:09:45,840 Speaker 3: we can learn from that. Plus, what people forget is 200 00:09:45,880 --> 00:09:47,559 Speaker 3: that many of the recommendations of the Royal Commission in 201 00:09:47,600 --> 00:09:50,720 Speaker 3: Australia they would lead to a more competitive and probably 202 00:09:50,800 --> 00:09:53,120 Speaker 3: less profitable banking sector. So one of the things that 203 00:09:53,280 --> 00:09:55,680 Speaker 3: happened in Australia because of the COVID crisis is that 204 00:09:55,720 --> 00:10:00,600 Speaker 3: many of these recommendations where I think frozen or just like, 205 00:10:01,160 --> 00:10:03,319 Speaker 3: oh yeah, well, maybe it's not great to implement these 206 00:10:03,320 --> 00:10:05,680 Speaker 3: proposals now because it will go at the expensive jobs 207 00:10:05,679 --> 00:10:06,560 Speaker 3: in the banking sector. 208 00:10:06,600 --> 00:10:07,240 Speaker 1: So I'm not sure what. 209 00:10:07,200 --> 00:10:09,839 Speaker 3: Happened afterwards after COVID and which of the recommentation is 210 00:10:09,840 --> 00:10:12,040 Speaker 3: still being implemented. But it seems as though that the 211 00:10:12,040 --> 00:10:14,800 Speaker 3: banking sector in Australia is pretty powerful and lobbied in 212 00:10:14,800 --> 00:10:17,040 Speaker 3: such a way that they probably can keep going on 213 00:10:17,160 --> 00:10:19,920 Speaker 3: with what they did before the Royal Commission report. 214 00:10:20,000 --> 00:10:21,680 Speaker 1: But that's speculation for my side. 215 00:10:21,880 --> 00:10:24,040 Speaker 2: What do you think is the biggest issue facing our 216 00:10:24,040 --> 00:10:25,000 Speaker 2: banking sector? 217 00:10:25,080 --> 00:10:26,920 Speaker 1: Now, well, that's a good question. 218 00:10:27,160 --> 00:10:29,920 Speaker 3: I think actually there's nothing really that affects the banking 219 00:10:29,960 --> 00:10:34,000 Speaker 3: sector here except for the complacency the tardiness when it 220 00:10:34,000 --> 00:10:36,400 Speaker 3: comes to innovations, and that is because of the way 221 00:10:36,400 --> 00:10:38,680 Speaker 3: the market is structured. There's not a lot of competition, 222 00:10:38,760 --> 00:10:41,000 Speaker 3: for example, from in FinTechs. You don't see that. The 223 00:10:41,040 --> 00:10:43,520 Speaker 3: expectations are that the smaller banks are meant to be competing, 224 00:10:43,520 --> 00:10:46,240 Speaker 3: which I think is beyond belief in a way. You know, 225 00:10:46,360 --> 00:10:49,200 Speaker 3: innovations should come from the largest banks, the big four, 226 00:10:49,240 --> 00:10:51,800 Speaker 3: They should be leading there, so you know we have 227 00:10:51,840 --> 00:10:54,880 Speaker 3: a sable financial system. But it's just as slowness and 228 00:10:54,880 --> 00:10:57,760 Speaker 3: the tardiness with the innovations that probably upsets people. 229 00:10:58,280 --> 00:11:10,960 Speaker 2: Thanks for joining us, Martin. The majority of New Zealand's 230 00:11:11,000 --> 00:11:14,200 Speaker 2: banks are OSSIE owned and those banks went through a 231 00:11:14,360 --> 00:11:18,480 Speaker 2: Royal Commission into their practices five years ago. In Australia, 232 00:11:19,040 --> 00:11:21,680 Speaker 2: to discuss the outcomes of that and the lessons it 233 00:11:21,760 --> 00:11:25,079 Speaker 2: could pose for New Zealand. We're joined now by ABC 234 00:11:25,320 --> 00:11:32,600 Speaker 2: journalist Dan Ziffer. Dan, you've covered banking in Ozzie for 235 00:11:32,760 --> 00:11:35,240 Speaker 2: years now. Can you give us a brief background of 236 00:11:35,280 --> 00:11:38,680 Speaker 2: the woes Australia has faced and is facing. I guess 237 00:11:38,679 --> 00:11:40,640 Speaker 2: when it comes to its banking sector. 238 00:11:40,480 --> 00:11:42,720 Speaker 6: We've probably need to go back about ten years. 239 00:11:43,000 --> 00:11:45,360 Speaker 4: There was a series of scandals, a lot of them 240 00:11:45,360 --> 00:11:48,080 Speaker 4: in financial advice, a lot of them really to do 241 00:11:48,280 --> 00:11:52,280 Speaker 4: with the banks putting the interests of customers well below 242 00:11:52,360 --> 00:11:56,240 Speaker 4: the interests of the institution. These scandals build up and 243 00:11:56,480 --> 00:11:59,240 Speaker 4: up and up until there's quite a political weight to 244 00:11:59,360 --> 00:12:01,679 Speaker 4: call a commission of inquiry, which in Australia is called 245 00:12:01,720 --> 00:12:05,480 Speaker 4: World Commission. This became very politicized. Our Labor Party on 246 00:12:05,480 --> 00:12:08,120 Speaker 4: the left wanted it. The government who had the coalition, 247 00:12:08,200 --> 00:12:11,720 Speaker 4: the Conservatives didn't want it. But essentially the National Party, 248 00:12:11,760 --> 00:12:14,160 Speaker 4: who are a partner with the coalition, they kind of 249 00:12:14,200 --> 00:12:16,640 Speaker 4: eventually came on board and the numbers grew and grew 250 00:12:16,679 --> 00:12:21,840 Speaker 4: and grew to such a point that in late twenty seventeen, 251 00:12:22,360 --> 00:12:26,000 Speaker 4: the then Prime Minister, Malcolm Turnbull called Royal Commission, a 252 00:12:26,120 --> 00:12:28,400 Speaker 4: very short and sharp one which went for a year 253 00:12:28,800 --> 00:12:30,160 Speaker 4: all the way through. 254 00:12:30,040 --> 00:12:32,760 Speaker 6: Twenty eighteen, and then reported slightly after that. 255 00:12:32,840 --> 00:12:36,360 Speaker 4: So since then we had the pandemic, which again changed 256 00:12:36,360 --> 00:12:38,440 Speaker 4: people's relationships with the bank. 257 00:12:38,480 --> 00:12:41,040 Speaker 6: They're now on probably, i'd say, a better keel. 258 00:12:41,440 --> 00:12:45,000 Speaker 4: The regulators are stronger, the public scrutiny is still there, 259 00:12:45,160 --> 00:12:48,040 Speaker 4: but they certainly have launed their reputations. 260 00:12:48,040 --> 00:12:49,600 Speaker 6: I don't meant that in the malicious way. 261 00:12:49,840 --> 00:12:52,720 Speaker 4: They've actually improved what they do from where we were 262 00:12:52,760 --> 00:12:54,440 Speaker 4: a decade ago, but they had to get through a 263 00:12:54,559 --> 00:12:55,720 Speaker 4: lot in the middle first. 264 00:12:55,840 --> 00:12:58,280 Speaker 2: When it comes to that Royal Commission, it's been five 265 00:12:58,400 --> 00:13:02,000 Speaker 2: years since the final report and recommendations. What has actually 266 00:13:02,000 --> 00:13:04,320 Speaker 2: been tangibly done a lot. 267 00:13:04,559 --> 00:13:06,720 Speaker 4: I will say that when all the journalists and I 268 00:13:06,800 --> 00:13:09,800 Speaker 4: were covering it, we used to joke RC twenty three, 269 00:13:10,160 --> 00:13:12,760 Speaker 4: which meant that we'll be back here in five years 270 00:13:12,800 --> 00:13:15,200 Speaker 4: time we'll be having another one of these. But actually 271 00:13:15,240 --> 00:13:17,720 Speaker 4: what happened is they did a lot of boring but 272 00:13:17,800 --> 00:13:21,880 Speaker 4: important work. They spent hundreds of millions of dollars in 273 00:13:21,960 --> 00:13:25,440 Speaker 4: improving really old systems that were allowing these bad things 274 00:13:25,440 --> 00:13:29,800 Speaker 4: to happen. They changed internal culture and certainly fixed it, 275 00:13:29,840 --> 00:13:32,880 Speaker 4: but they certainly made big shifts so that problems would 276 00:13:32,880 --> 00:13:36,320 Speaker 4: be elevated. Every single thing that was exposed at the 277 00:13:36,559 --> 00:13:40,480 Speaker 4: Australian Banking Royal Commission was something that was noted inside 278 00:13:40,480 --> 00:13:43,680 Speaker 4: the bank, sometimes by a junior lawyer, an IT worker 279 00:13:43,720 --> 00:13:46,959 Speaker 4: in Bangalore, by customers. All of these problems were known, 280 00:13:47,360 --> 00:13:51,240 Speaker 4: but they just couldn't penetrate a high enough level to 281 00:13:51,240 --> 00:13:53,400 Speaker 4: get something done about them, or even if people were 282 00:13:53,440 --> 00:13:56,840 Speaker 4: made aware had reasonably senior level, they didn't care enough 283 00:13:57,280 --> 00:14:00,000 Speaker 4: to fix the problem or to create a long term 284 00:14:00,080 --> 00:14:02,640 Speaker 4: solution for the problem. So since then we've seen really 285 00:14:02,640 --> 00:14:05,280 Speaker 4: big shifts. We've seen changes in the law. We've seen 286 00:14:05,360 --> 00:14:09,320 Speaker 4: much stronger regulators and a different attitude from regulators. Rather 287 00:14:09,400 --> 00:14:12,160 Speaker 4: than essentially being the mosquito on the back of the 288 00:14:12,200 --> 00:14:15,720 Speaker 4: elephant and working out essentially cozy deals to deal with problems, 289 00:14:15,880 --> 00:14:18,960 Speaker 4: actually started prosecuting banks and when they've done things wrong 290 00:14:19,000 --> 00:14:22,960 Speaker 4: in a civil and even a criminal level, they've prosecuted 291 00:14:22,960 --> 00:14:25,920 Speaker 4: them for them. So that stuff does make a difference 292 00:14:25,960 --> 00:14:28,480 Speaker 4: in attitude, and it also tells the public that the 293 00:14:28,520 --> 00:14:31,280 Speaker 4: regulator is more serious about looking after them. 294 00:14:32,440 --> 00:14:35,960 Speaker 7: The frenzy of scandals exposed at the Royal Commission made 295 00:14:36,000 --> 00:14:40,480 Speaker 7: banks put customers first. The industry says it's gone back 296 00:14:40,560 --> 00:14:45,680 Speaker 7: to basics. Banks have simplified their operations, exiting financial advice, 297 00:14:45,840 --> 00:14:49,520 Speaker 7: wealth management and insurance. They now have a razor sharp 298 00:14:49,560 --> 00:14:53,880 Speaker 7: focus on core banking services that serve businesses and households. 299 00:14:57,000 --> 00:15:00,600 Speaker 2: As an aside, this Commission prompted the RBNZ and FMA 300 00:15:00,840 --> 00:15:03,160 Speaker 2: here in New Zealand to do a joint review of 301 00:15:03,280 --> 00:15:06,760 Speaker 2: bank conduct and culture here, which led to the instruction 302 00:15:06,840 --> 00:15:11,200 Speaker 2: of something called the Conduct of Financial Institution Amendment Act. Banks, 303 00:15:11,240 --> 00:15:15,440 Speaker 2: insurers and non bank deposit takers have until March thirty 304 00:15:15,480 --> 00:15:18,360 Speaker 2: first next year to have a KOFEE license as a 305 00:15:18,400 --> 00:15:21,640 Speaker 2: result of that, it's something if similar being done in Australia. 306 00:15:21,680 --> 00:15:25,520 Speaker 4: We haven't changed the licensing so much, but certainly every 307 00:15:25,560 --> 00:15:28,760 Speaker 4: problem that existed at one bank existed in the others. 308 00:15:29,040 --> 00:15:32,080 Speaker 4: You know, they were really broad and systemic. So the 309 00:15:32,080 --> 00:15:34,280 Speaker 4: biggest one was a thing called fees for no service, 310 00:15:34,320 --> 00:15:37,520 Speaker 4: which is exactly what it sounds like. It's taking fees 311 00:15:37,560 --> 00:15:39,640 Speaker 4: for services that were never rendered. It we're never going 312 00:15:39,640 --> 00:15:42,840 Speaker 4: to be rendered. This was a problem in the billions. 313 00:15:42,920 --> 00:15:46,560 Speaker 4: I mean Australians have received back about six billion dollars 314 00:15:46,960 --> 00:15:50,280 Speaker 4: from this problem. And of course, in all the ways 315 00:15:50,320 --> 00:15:53,760 Speaker 4: of these scandals, it started off very small. It's very isolated. Oh, 316 00:15:53,800 --> 00:15:55,680 Speaker 4: it's just to this section of the bank. Actually it's 317 00:15:55,680 --> 00:15:58,000 Speaker 4: a little bit broader. Actually, hold on, no, it's a 318 00:15:58,040 --> 00:15:58,840 Speaker 4: billion dollars. 319 00:15:59,040 --> 00:16:00,120 Speaker 6: You know, these. 320 00:16:00,040 --> 00:16:03,680 Speaker 4: Problems do tend to be systemic because if one bank 321 00:16:03,800 --> 00:16:06,320 Speaker 4: is doing them, they share employees, they share systems, they 322 00:16:06,320 --> 00:16:09,600 Speaker 4: share processes. Sometimes these things are falling through the cracks 323 00:16:09,600 --> 00:16:12,360 Speaker 4: and happening. So there hasn't been any change in the licensing. 324 00:16:12,520 --> 00:16:14,880 Speaker 4: I would say the biggest changes in Australia have been 325 00:16:14,920 --> 00:16:19,080 Speaker 4: attitudinal and cultural, as in internally with the bank, they 326 00:16:19,080 --> 00:16:21,280 Speaker 4: have improved and they've proved their focus on hold on, 327 00:16:21,560 --> 00:16:23,280 Speaker 4: this is actually four customers. 328 00:16:23,280 --> 00:16:26,280 Speaker 6: We don't exist for the bank. We exist four customers. 329 00:16:26,600 --> 00:16:28,960 Speaker 4: And with regulate, it's having that focus to the public 330 00:16:29,000 --> 00:16:31,360 Speaker 4: as well, rather than just trying to manage the banks 331 00:16:31,400 --> 00:16:33,680 Speaker 4: and deal with them, actually focusing on well, what's the 332 00:16:33,800 --> 00:16:36,960 Speaker 4: impact and how can we get a better result, not 333 00:16:37,080 --> 00:16:38,680 Speaker 4: just now but in the future. 334 00:16:38,840 --> 00:16:41,800 Speaker 2: It seems like New Zealand is years behind the countries 335 00:16:41,800 --> 00:16:44,800 Speaker 2: in the way of protecting customers from scams and the like. 336 00:16:45,040 --> 00:16:47,680 Speaker 2: We're only just looking into rolling out something called a 337 00:16:47,800 --> 00:16:52,240 Speaker 2: confirmation of paye and that's things like reimbursement, et cetera. 338 00:16:52,800 --> 00:16:55,840 Speaker 2: It seems like if a customer here is scammed, it's 339 00:16:55,920 --> 00:16:58,360 Speaker 2: their fault and it's quite the fine to get their 340 00:16:58,360 --> 00:16:58,840 Speaker 2: money back. 341 00:16:58,880 --> 00:17:01,440 Speaker 6: What's it like in Australia, It's pretty similar. 342 00:17:01,760 --> 00:17:04,359 Speaker 4: So a lot of the consumer groups here wanted essentially 343 00:17:04,560 --> 00:17:07,600 Speaker 4: UK model where the banks pretty much give back the 344 00:17:07,600 --> 00:17:09,040 Speaker 4: money in most circumstances. 345 00:17:09,280 --> 00:17:11,720 Speaker 6: Now, the banks, understandably you can see their argument. 346 00:17:11,480 --> 00:17:13,879 Speaker 4: Here, push back and said, look, if we pay money 347 00:17:13,880 --> 00:17:16,679 Speaker 4: back for every single scam, then there has to be 348 00:17:16,760 --> 00:17:20,080 Speaker 4: something on the customer to not act really. 349 00:17:20,000 --> 00:17:21,359 Speaker 6: Rashly and foolishly. 350 00:17:21,920 --> 00:17:24,480 Speaker 4: Now, the issue, of course is the scams are coming 351 00:17:24,600 --> 00:17:28,919 Speaker 4: increasingly sophisticated, so it's not as simple as what we 352 00:17:29,000 --> 00:17:31,200 Speaker 4: call the kind of Nigerian print scam that used to 353 00:17:31,200 --> 00:17:33,960 Speaker 4: exist where people say, hey, I've got all this money, 354 00:17:33,960 --> 00:17:35,439 Speaker 4: but it's locked up and I just need a bit 355 00:17:35,480 --> 00:17:36,560 Speaker 4: of help to get it out and then you can 356 00:17:36,560 --> 00:17:39,880 Speaker 4: share our riches. The scams now are really sophisticated. They 357 00:17:39,920 --> 00:17:42,960 Speaker 4: look like it's coming from your accountant or your bank 358 00:17:43,119 --> 00:17:45,920 Speaker 4: or your child saying hey, we need your money or 359 00:17:45,960 --> 00:17:49,320 Speaker 4: we need your details. So there is certainly a very 360 00:17:49,400 --> 00:17:53,760 Speaker 4: live discussion here about how much consumers need to wear 361 00:17:53,800 --> 00:17:55,679 Speaker 4: and how much care they need to take, and how 362 00:17:55,760 --> 00:17:58,720 Speaker 4: much responsibility banks should take given that they certainly have 363 00:17:58,880 --> 00:18:02,399 Speaker 4: access to power and more systems. The good things that 364 00:18:02,400 --> 00:18:04,959 Speaker 4: are happening here, I'm sure similar is happening in New Zealand, 365 00:18:05,160 --> 00:18:08,040 Speaker 4: is that they are working with the telcos and mutility 366 00:18:08,040 --> 00:18:11,160 Speaker 4: companies and to change those systems and make them more secure. 367 00:18:11,359 --> 00:18:13,840 Speaker 4: As simple as now it happens at most banks that 368 00:18:13,880 --> 00:18:15,760 Speaker 4: didn't happen a year ago is when you put in 369 00:18:15,800 --> 00:18:18,600 Speaker 4: a code to pay a bill, it actually checks whether 370 00:18:18,680 --> 00:18:22,080 Speaker 4: that code is the utility bill that you're going to 371 00:18:22,080 --> 00:18:25,480 Speaker 4: pay or if it's a completely different company. So there's 372 00:18:25,480 --> 00:18:27,320 Speaker 4: a lot more to be done, and I think it's 373 00:18:27,320 --> 00:18:31,040 Speaker 4: an ongoing discussion about how much risk there is for 374 00:18:31,080 --> 00:18:33,440 Speaker 4: a customer and how much risk the bank needs to wear, 375 00:18:33,960 --> 00:18:36,399 Speaker 4: both of them essentially and introducing work. 376 00:18:36,800 --> 00:18:44,880 Speaker 2: Thanks for joining us, Dan. That said, for this episode 377 00:18:44,920 --> 00:18:47,800 Speaker 2: of the Front Page. You can read more about today's 378 00:18:47,800 --> 00:18:51,480 Speaker 2: stories and extensive news coverage at NZ Herald dot co 379 00:18:51,640 --> 00:18:55,240 Speaker 2: dot nz. The Front Page is produced by Ethan Sials 380 00:18:55,320 --> 00:19:00,159 Speaker 2: with sound engineer Patty Fox. I'm Chelsea Daniels. Subscribe to 381 00:19:00,200 --> 00:19:03,480 Speaker 2: the front page on iHeartRadio or wherever you get your podcasts, 382 00:19:03,760 --> 00:19:07,160 Speaker 2: and tune in tomorrow for another look behind the headlines.