Those of you with long memories will know that I have often advocated for a commission of inquiry into the banking sector in New Zealand.

I was particularly vocal about it in the immediate aftermath of the release of the Australian Royal Commission. That unearthed a raft of practices in the Australian banking and insurance community that did not protect the financial interests of Australians but instead was of benefit to the banks bottom line.

So with the common ownership of banks on this side of the Tasman by the Australian interests then why shouldn’t there be the same practices here? And I had heard plenty of tales of upselling and financial pressure on bank’s customers to suggest that a good look here would be warranted. 

And why not?  After all nothing to hide, nothing to fear. I thought perhaps the banks might jump at it because a banks greatest enemy is a loss of confidence, trust and reputation.

But the commission was not forthcoming.  Instead the Reserve Bank and the Financial Markets Authority threw a cursory look at the sector and its culture and pronounced that mostly everything was tickety boo, though a few of the upselling processes were not optimal.  Banks heard that and the bonuses for getting customers to buy financial instruments they don’t need got pruned.

But the calls for a closer look at New Zealand banks have resumed after the headlines created by the ANZ Bank.  First the bank got stung by the revelation that they had been failing to meet capital adequacy requirements for four years and then the Hisco revelations of gold plated employment deals and the sale of an undervalued house by the bank to his wife.  Bernard Hickey at interest.co.nz says these headlines are proof that a more rigorous look at banks is necessary.  Winston Peters has said that ANZ chairman Sir John Key should resign because the buck stops at the top.

Now we have a whole swag of investigations and policies launched by the Government, Reserve Bank and the FMA to make sure the banks are robust and not greedy.  So, again, isn’t that more proof that a good hard look is needed.  Well actually I think that’s proof of the opposite.

I’m no longer so sure that a Royal Commission is necessary.  I think the pressures brought to bear by our local regulators and government are making the banks more self-regulatory.  There is an argument that Sir John Key is frontfooting the claims and rumours and doubts which is why David Hisco is out of here on his horse. He knows Australian style misbehaving is not acceptable here.  Other Chairmans and CEOs will be watching and taking note.

A Royal Commission is two years and millions of dollars thrown away.  To me, the combination of the Haynes Commission in Australia and the events here have sent a message to banks to play fair and not fast and loose.  And it seems to me that they are listening.