ANZ NZ's message to its regulators in the wake of the Australian Royal Commission on Financial Services is 'come and have a look', CEO David Hisco says

ANZ NZ's message to its regulators in the wake of the Australian Royal Commission on Financial Services is 'come and have a look', CEO David Hisco says
David Hisco

By Gareth Vaughan

ANZ New Zealand CEO David Hisco says his bank has told local regulators, in the wake of the Australian Royal Commission on Financial Services, "to come and have a look" inside the country's biggest bank.

Speaking on Tuesday Hisco told interest.co.nz he was surprised by the revelations from the Royal Commission, noting they don't make for good reading. Although ANZ NZ, like ASB, BNZ and Westpac NZ , is part of an Australian banking group, Hisco pointed out the NZ units are separately governed and separately regulated from their Aussie parents, and offer simpler products.

"I think our regulators are in our business pretty regularly, and we're talking to them about what's going on in Australia at the moment and they're welcome to come and look in our business," Hisco said.

"We think there are quite large differences between Australia and New Zealand. For example, they have large superannuation balances, self managed super funds and we don't have that here. You've got a bunch of advisers who are running around [in Australia] looking to deal into that, so we just don't have that here. Our loan arrears are at a lower level [than Australia], which suggests that we're not throwing money at people recklessly. So there's a number of things, when you really start to talk it through with the regulators, that do suggest there's a difference in the markets," said Hisco. 

"We've said to the regulators 'if you've got any concerns come in and have a look and we'll work with you on it.' [There's] ongoing dialogue anyway. In relation to this [Royal Commission] we've said 'whatever you want to do just come and have a look'."

NZ's key financial services regulators are the Financial Markets Authority (FMA) for conduct, the Reserve Bank as prudential regulator, and the Commerce Commission for consumer credit. And for customer complaints there's the Banking Ombudsman. On Wednesday morning FMA CEO Rob Everett revealed he and Reserve Bank Governor Adrian Orr told NZ's big bank CEOs on Monday to prove their banks are different to their Australian parents in the wake of the revelations from Australia's Royal Commission.

'There's a different feeling in New Zealand'

Hisco, originally from Australia, says there are major differences between the banking markets in NZ and Australia. The ANZ customer complaints that go to the Banking Ombudsman are "just nothing like Australia," he said.

"They're sort of random things more to do with service failings and misunderstandings. I just don't seem to see the horror stories, and I don't know whether that's across the industry, but certainly we feel pretty comfortable that we [ANZ NZ] don't have those sorts of [Australian] horror stories," Hisco said.

"On the other hand we've got 8,000 staff. It's a big business. not to say that we're perfect, I'm sure things go wrong. But we've got a set of principles that when things go wrong we understand it, put it right and fix it as quickly as we can. And in many cases we are required to report those to the regulators, so we report those and the remediation proposed, to the regulators."

Asked what differences he sees in the banking culture between Australia and NZ, Hisco described NZ as a country of small towns where people know each other. 

"There's a different feeling in New Zealand...You're in the community every day, you run into the people that you serve all the time. It's Kiwi culture, people don't want to do the wrong thing by people. I'm not saying that Australians do, but we operate in a smaller environment where people know each other, and I think people want to be able to walk down the street and hold their head high in the way that they do their job. Australia has much bigger cities and it's just a much different feeling over there. And I can say that having worked in both places," said Hisco.

He pointed to changes ANZ NZ made to the way staff are remunerated as evidence of being ahead of proposals Australia’s ex-Public Service Commissioner, Stephen Sedgwick, made in a retail banking remuneration review a year ago.

"By the time the Sedgwick Review came out of Australia we were halfway through making changes to the way we paid our staff as a result of some of the findings from the UK. So then we said 'Okay, how does what we've done line up with Sedgwick' and found it lined up pretty well actually," said Hisco.

ANZ to amend conflicts of interest disclosure

Meanwhile, an FMA spokesman says the regulator has engaged with ANZ to ensure the bank improves areas of its disclosure documents. This comes after NBR reported the bank had advised a customer that most or all of a $540,000 nest egg should be invested in ANZ products.

"ANZ has agreed to amend the content around conflicts of interest and the extent to which they provide advice on products provided by only one organisation, or whether they provide advice on competitors’ products. ANZ have indicated they will publish updated disclosure documents by 1 July, and they intend to update their processes to reflect the changes to their disclosure. The FMA has repeatedly made clear that adequate disclosure of conflicts of interest to investors and consumers is essential. The breadth or range of the products on which the client is being advised to invest a critical part of such disclosure – both within the vertically integrated firms and in the broader advice sector," the FMA spokesman said.

An ANZ spokesman said the use of ANZ managed funds in the bank's Discretionary Investment Management Service (DIMS) proposition is set out in the disclosure documents, along with a disclosure of the relevant fees.

"We have, however, recently revised the conflicts of interest disclosure in the DIMS disclosure documents, and a new version will be in place for new clients by 1 July 2018. This followed discussions with FMA who had raised similar issues in this respect. We have also recently revised our disclosure statements for Authorised Financial Advisers to make it clearer that they will only provide advice on ANZ’s DIMS," the ANZ spokesman said.

"We don’t consider that there are any conflicts of interest in our management of the DIMS proposition which would materially influence the investment decisions we make on behalf of clients. In particular, we have a robust and independent investment decision making process and procedures relating to the selection, monitoring and review of financial products and services. We also maintain separation of reporting lines and information flows between different areas of our business that are involved in financial markets. Finally we also meet our legislative duty to certify whether any transactions that involve benefits to related parties are in investors’ best interests and on arms-length terms. These certificates are completed by our Chief Investment Officer and provided to the FMA each quarter," the ANZ spokesman added.

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Really? It is pretty hard to believe that the parent company has not impressed it's culture on the NZ subsidiary. Did they thumb the NZ branches thumb noses at the lead given by their owner and head off in their own direction. Really?
Didn't the Australian banks make exactly these sorts of statements before they were finally exposed?

Statements I've heard from multiple folk working (or previously working) for ASB say that indeed, both systems and culture have been coming down like manna from Oz, and ASB has been starting to feel more like CBA New Zealand than the ASB of the past.

Different bank, obviously...but if it's anything to go by...

Not just banks either, the company i work for used to be a multinational corporate and everything was driven out of Australia. Processes and culture, because they believe that their way of doing things is the best way of doing things for profitability/efficiencies etc. They'll definitely be told to toe the line over here.

How independent can governance be when directors and senior managers are appointed by the Australian parent group for a New Zealand subsidiaries? They are mini-me organisations.

Here are some interesting figures that I have drawn from the Deloitte top 200 companies list putting the bank profits into perspective. If they do not convince you that we are being monumentally ripped of then nothing will.

Finance sector Profits $5,247,000,000

4 Australian banks NZ Branch profits $4,480,000,000

Top 200 Company's combined profits (finance not included) $4,916,000,000

Sum Total Finance sector plus Top 200 Companies $10,163,000,000

Finance sector/Total 51.63%

4 Australian banks/ total 44.08%

4 Australian banks/ Top 200 91.13%

The banking sector just moves the money around for the rest of the economy where all living, working and hard stuff is done. It is largely electronic and automated. I suggest that the level of bank profits are far greater than the value of their service warrants.

Obviously a sector that is grossly over fat and hopefully ripe for some form of massive disruption.

Anyone got any horror stories?

Yes look at this report -
https://www.zerohedge.com/news/2018-04-30/new-type-poverty-crushing-midd...
If this report is true or even partially true its absolutely evil and whilst the Bankers are in the gun the question of the reserve Bank being aware since 2007 and seemingly doing nothing questions their competence or confirms their complicity.

My only concern was over break fees when refinancing a rental property mortgages to a lesser rate some years back.
I thought that my bank was both consistent with terms and conditions and reasonable.
However, the fee for my wife for another property with a different bank (with pretty close to the same amount, differences in interest rates and term left) was surprisingly over 60% more. Clearly not a reasonable and even playing field between banks.

Pleasing to see a confident invitation by the ANZ; I hope the other major banks follow suit.
It is important for public confidence in our banks that the government and/or FMA appoint an independent investigator - not necessarily a Royal Commission - to investigate.
Of note is that Hisco has referred to the Banking Ombudsman. However, I find it very strange that the Banking Ombudsman, Nicola Sladden, who is in a position to best know of the extent of issues has been surprisingly quiet while both the Reserve Bank Governor Adrian Orr and the Minister Kris Faafoi who are not directly involved have both made various comments.

Latest Banking Ombudsman Annual Report I could find was 2014-15.
They handled 265 disputes (1 every business day).
Disputes were up 11% on previous year.
Complaints regarding lending (mainly regarding early repayment costs) were down from 37 to 33% of complaints which is not surprising as mortgage rates were reasonably stable during that period hence less people wishing to break for refinancing at lower rate purposes.
Issues related to bank accounts and unfair fees relating to credit cards were up.
I do not suggest that in anyway this is the full story and it could be the tip of an iceberg. How many customers would either not know that a situation was either unfair, or be bothered with making a complaint to the Banking Ombudsman, or even be aware that a Banking Ombudsman was available?

I think if you take an opinion across the cross section of customers, I think they would say the fees are high.

Do the Banks publish the break up of fees charged, product/service wise ? That may give an idea about whether the fees are reasonable or exorbitant, relating to the size of the relevant product portfolio and across the industry ...