5 November 2018

The New Zealand banking sector appears able to sigh with relief  – or at least draw a deep breath and wait for media attention to move on. The players have been told that a core area of their professional expertise – the governance of management risk – requires serious attention, and that they must markedly improve how they identify and manage unethical behaviour.  None of which is a surprise as polls rating the trustworthiness of bankers score them poorly, among taxi drivers, clergy and lawyers. But the Reserve Bank / Financial Markets Authority report published today, after more than 4000 hours of inquiry, struggles to rationalise the Government’s angst at the profits Australian banks have earned in New Zealand.

It has not uncovered the malfeasance and scale of self-interest being conceded ahead of the Australian Royal Commission into Banking etc Services reporting its findings.  The major players are the same in both markets but something in New Zealand seems to moderate exploitative practices hitherto viewed as acceptable by the leaders in these banks – in a sector once considered the epitome of trustworthiness. The most pejorative observation about the findings seems to be that it is “disgraceful” that only half of the banks had adopted FMA conduct and risk framework guidelines issued 21 months ago.

Business depends on bankers. It seems axiomatic that efficient and effective business depends on good bankers. And presumably, the ease of doing business is shaped by supportive banking services.

Last week the World Bank released its annual Ease of Doing Business survey results. Of the 120 economies assessed, New Zealand, overall, is the place where it is easiest to do business, ahead of Singapore and Denmark. New Zealand has always rated in the top decile in this survey. What is notable about the characteristics evaluated is that business acumen does not dominate. Many determinants are governance skills – the functionality of State servants who develop, implement and improve a regulatory climate sympathetic to business. But there is also an interface with banking capacity, with Getting Credit, Trading Across Borders, Resolving Insolvency. New Zealand is the easiest place for a business to get credit! And a number of the relevant factors are incorporated in the measures gathered by the World Justice Project to compile the Rule of Law Index – in which New Zealand again this year was placed 7th of the 113 surveyed jurisdictions.

The longer this post gets, the more it echoes past entries. There are no fireworks, despite the date.