By Gareth Vaughan
Working out what are good customer outcomes should not be rocket science for banks, says Reserve Bank Governor Adrian Orr.
After the regulators' conduct and culture report was released in November they said individual banks will receive specific detailed responses, will need to develop a plan to address the feedback, and report their progress to the regulators by the end of March. Banks have also been asked to remove pay incentives linked to sales.
"It's not rocket science. It's just about making an effort to think about what are good customer outcomes. Some banks used to talk about whole of life experience. 'How can I get you in a savings account as a kid, help you through university because I know at some point you're going to be worth a lot to me'," Orr says.
In terms of the March deadline he says the two regulators will be working "very, very closely" with the bank boards and senior management to see how seriously and committed they are to the findings.
"Because a lot of the findings was about preparedness to invest in the frameworks, rearrange the importance of agendas, understanding incentive structures and whether they are driving the kind of long-term financial outcomes that society and customers expect. So that will be a lot of intensive work with them," says Orr.
He expects banks' responses in March to be "quite telling, straight up, very quickly."
"I have to say that the vibe so far has been good. Everyone seems to be very busy and working on this and we're being told that they hear us, they [will] do it. We will be making sure that they are committed to those plans and that we can see those plans' progress," says Orr.
Naming and shaming
Asked about the "naming and shaming" of National Australia Bank's chairman and CEO Ken Henry and Andrew Thorburn in the final Australian Royal Commission report, and whether such outing of senior bankers could happen in New Zealand, Orr said he hopes things unfold in a different way here.
"I would hope that things unfold in a way that if that comes to that situation we probably wouldn't even need to name them, the institution or the individuals. The process we're following rather than everyone's guilty until proven innocent which was the McCarthy process, that we are saying 'here is your chance to explain and if you are explaining well and it's very convincing then why wouldn't you be shouting from the rooftops about what we are doing,' what they themselves are doing. So there's an enormous incentive to self disclose what you are doing and how it is improving," says Orr.
"I don't know where the end point comes. The great news was we did not find systemic misbehaviour. What we found was widespread under-investment across thinking in this space and a lot of gaps which could lead to the risk."
Monetary policy, RBNZ Act review & money creation
In the video Orr also talks about the Reserve Bank's move to a Monetary Policy Committee and what impact this has on his powers as Governor, the dual monetary policy focus on employment and price stability, the Reserve Bank's objectives as phase two of the Reserve Bank of New Zealand Act review gets underway, and money creation including core money and credit creation.
(This is part two of the interview with Adrian Orr. Part one, on bank capital, is here).
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