New Zealand’s banking and finance services

Brendon Wilson

by Brendon Wilson

TINZ Director

Writing for Employers and Manufacturers Association

BusinessPlus Magazine

By world standards, New Zealand’s banking and financial sector is small. Even so, the sector aims to be accessible to its retail and business clients. Australian and New Zealand banks have good credit ratings. The value of these were demonstrated as they came through the global financial crisis better than counterparts in most parts of the world.

It is important for New Zealand’s banking and finance sector to be resilient, efficient and innovative to enable business growth, export expansion, access to capital for investment in plant and innovative product development. Debt finance plays a pivotal role for NZ companies in meeting their customer expectations and facing the world’s competitive innovators.

So how can our banking and finance sector improve and show its responsiveness to the needs of New Zealand business?

As a New Zealand business, do you identify with some of these typical issues?

  1. Your earnings just cover your costs, with seasonal patches when they don’t
  2. You work long hours
  3. Your business’s tax regime is overly complex and compliance costs are high
  4. Health and safety requirements have recently become more demanding
  5. You receive next to no interest on your deposits
  6. You have to meet banks' timeframes for deposits – e.g. your biggest sales may be on week-ends when banks aren't open, so your deposits often can’t be made in time to cover outgoings
  7. When you borrow for expansion or working capital, your interest rates are 3-5 % above liber, meaning your competitors may be paying considerably less for their debt – even if your business is local, you are exposed to offshore competition and costs‎
  8. To borrow at all, banks require tangible, often personal assets, which means many mortgage their homes to acquire business capital – a serious disincentive to opportunity, growth and innovation, adding personal risk.

Transparency International New Zealand (TINZ) is undertaking a consultation process to design an assessment of the New Zealand financial sector’s current performance. Independent (not TINZ) professional assessors will work with banks and financial institutions to establish their real responsiveness and whether regulation is playing a suitable role. TINZ Financial Integrity System Assessment (FISA) aims to objectively assess our financial system’s approach to building trust with its customers.

The IMF reports that despite the GFC, only around 2% of the world's banks have changed the way they do business, including the strengthening of their governance and integrity systems to reduce risk, and preventive measures against bribery and corruption. Many of the features that support unethical, risky, costly financial behaviours still exist. TINZ’s FISA assessment aims to discover whether New Zealand banks and financial service providers are different, and in what areas.

Assessed, proven transparency, accountability, strong integrity systems and core ethical values will illuminate the qualities of our B&F services and will enable lowering costs of corruption risk and poor practice, and the risk margins they carry.

Given the importance of reputation to New Zealand business, are risks to economic growth being lessened through our financial system, or are risks adding costs to all our operations that stymie innovation, opportunity and growth?

TINZ has designed the FISA to give an independently-assessed, professional, objective overview of how well the New Zealand financial sector’s meets expectations and requirements, and will result in the development of initiatives and tools to reinforce a culture of integrity and realise greater benefits for business.

As the New Zealand economy continues to grow and become engaged with new patterns of business and new global partners, it increasingly needs to build relationships with and within countries with differing standards. For prudential purposes, the New Zealand financial sector needs to monitor risks that are associated with this diversity of business relationships.

The recently-announced sale of UDC Finance by ANZ to Chinese interests reminds us of the openness of New Zealand's financial organisations to global economics. It is important that we are open to world competitive capital and services, but it is important that all those providing financial services to New Zealand businesses are aware of what it takes to meet customer and integrity expectations here, and demonstrate how they design their processes to meet them. This contributes further to New Zealand’s reputation.

The assessment (FISA) examines the extent to which the financial system meets and adds to our reputation, and harvests for clients and our economy the benefits of a strong reputation.

It may take the disruption of cyber-currency trading, peer-to-peer lending, crowd funding platforms and other technologies before the international financial system finally recognises that change is needed to maintain the public's and business’s trust. It will also be important to ensure these new mould-breaking financial innovations are built on strong integrity systems, and meet our needs and expectations in open visible ways.

The progress of TINZ’s FISA assessment will feature in future articles [to the EMA].

We encourage you to look at the current FISA draft assessment, and let us know your thoughts. Click here View the latest draft assessment for consultation.

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