Banker praises Australian regime

Ralph Norris. Photo / Dean Purcell

Leading Australasian banker Ralph Norris says it's time we stopped griping about Australian banks.

The chief executive of ASB Bank's Australian parent company, Commonwealth Bank, said the Australian banks - which between them hold 85 per cent of the NZ banking sector - had been unfairly maligned in New Zealand.

"Unfortunately the rivalry that exists on the sporting fields has got somewhat more of a malevolent strain to it in a commercial sense in relation to the Australian banks."

He welcomed the multi-party parliamentary banking inquiry which has been
set-up by Labour, the Greens and the Progressives.

"It may actually end up as a good thing if it clearly points out what is myth and what is anecdotal and really gets to the nub of the issues," Norris said.

"It would probably air a lot of facts which would tend to reinforce the view that the Australian banks have treated their New Zealand customers through their NZ subsidiaries fairly."

Norris made the call for a "common regulator" to oversee the prudential supervision of the transtasman banking industry when speaking at the Australia New Zealand Leadership Forum in Sydney.

He said Australia's ability to weather the global financial crisis was in large part due to the Australian Prudential Regulation Authority's (APRA) singular focus on banking supervision.

"If you look at the fallout in the UK and the US in particular, it's because of the fact that those economies now have weak banking systems which are not able to support credit growth and therefore there has been a significant contraction in economic activity."

An Australian Government-led push for APRA to supervise Australian banks operating in New Zealand was shelved in 2006 in favour of the NZ Reserve Bank continuing to exercise this function under an enhanced information-sharing model, instead of concentrating solely on monetary policy like its Australian counterpart does.

But Norris said it was time to put the issue on the table again.

He contrasts the situation in Australia, where APRA had learnt from financial debacles to ensure a strong supervisory focus, with the conditions which led to the collapse of the finance company sector in New Zealand.

"Most people knew the sector had real prudential issues - particularly around concentration issues and related party transactions - which led to the sector's undoing," said Norris.

The four Australian banks - Commonwealth, Westpac, BNZ and ANZ-National - have been under sharp scrutiny, with claims about persistent high interest rates, the difficulties of gaining access to credit, and the "high profit margins" of the retail banks.

He points out that during last year's global financial crisis the New Zealand subsidiaries of the Australian banks were not able to fund themselves off international markets.

"The Australian banks were effectively raising funds internationally and then transferring them to their New Zealand subsidiaries," Norris said.

"If New Zealand had a situation where its banking system was effectively stand-alone then I think the difficulties for the NZ banking system would have been very similar to what has happened in Ireland."