Roger Award Report 2005
- by Joe Hendren
The Bank of New Zealand (BNZ) and Westpac Banking Corporation are the joint winners of the 2005 Roger Award for the Worst Transnational Corporation Operating in Aotearoa/New Zealand. While the BNZ and Westpac richly deserve to receive the dubious honour in 2005, the other two major trading banks should not be too disappointed as they are also guilty of much of the skulduggery outlined below. Had the ASB and the ANZ also been nominated it is likely that all four would have shared the jeers as joint winners.
It is an irony that the Auckland businessmen who launched the BNZ in 1861 complained about the inability of foreign banks to act in New Zealand’s interests (1). Since being privatised by a Labour government in the late 1980s the BNZ was bailed out of financial trouble by the Government in 1989 and again in 1990, before being sold to the National Australia Bank in 1992. Westpac began in 1982 as an amalgamation of the Bank of New South Wales (which had been in NZ since the 19 th Century) and the Commercial Bank of Australia. In 1996, Australian-owned Westpac took over Trust Bank, then the last major bank still in New Zealand ownership, leaving branch closures and redundancies in its wake.
The four Australian owned banks have a huge influence on the economic and political life of the country. Peter Thodey, the Managing Director of the BNZ is a member of the Business Round Table. Westpac Chief Executive Ann Sherry, as well as being the chairwoman of the Government's Innovation Advisory Group, formed part of a group of select business leaders who were invited by Prime Minister Helen Clark into her office for a chat - in the middle of the 2005 coalition negotiations. According to business sources speaking on background, Clark sought confidential advice on Cabinet appointments and a more pro-business direction for her third term in office (2). The Chief Executive of the 2004 Roger Award winner, Telecom, was also present.
The news media are encouraged to contact the banks’ “chief economists” for public comment on the banking sector and the overall state of the economy. While economists employed by the banks are regularly cited by the news media, this has not always been the case. Prior to the mid 1980s, journalists were more likely to approach academic economists in the universities for comment on economic issues. While the banks may claim their economic commentary is, as Westpac put it, “independent of any other bank interest” (3) this is precisely the point on which their credibility depends. It is also useful free advertising. Yet it is hard to imagine any of the chief economists issuing any sort of criticism of the actions of their employer or the banking industry as a whole. This would be the true test of “independence”. As the Roger Award Judges’ Report will show, the economic commentary issued by the banks is often self serving, particularly when the interests of the foreign-owned banks appear to be at stake. Westpac provided a particularly galling example in 2005 when its Chief Economist, Brendan O’Donovan, prepared some highly politically loaded costings of a key Labour Party election pledge and released these at a critical time in the campaign.
Despite the appalling actions of the BNZ and Westpac in 2005, the situation is not all doom and gloom. As the Roger Judges note in their Judges’ Statement, a recurring theme of the 2005 awards was the way that the big companies, determined to get their own way, mounted a heavy bullying campaign against legitimate government authorities. It was particularly encouraging to see the appropriate regulatory authorities take action against the banks in 2005.The Commerce Commission brought criminal charges against the banks for failing to inform their customers of hidden currency conversion fees when using credit cards. The Reserve Bank sought to protect New Zealander’s savings in the event of a banking collapse of one of the foreign-owned banks, tightening the rules around capital resources and the outsourcing of key bank functions. It also insisted that Westpac incorporate in New Zealand and issued strong advice to the Government on the dangers of transferring the supervision of banking to a single trans-Tasman regulator. The Inland Revenue Department (IRD) presented the banks with a large tax bill for (what it believes to be) tax obligations unpaid in previous years. This year our public servants did their job – it’s a pity our politicians have not been as resolute.
The Indignity Of Having To Pay Tax
In 2004 the Inland Revenue Department issued the ASB, ANZ National Bank, Westpac and the BNZ with bills for more than $1 billion in back tax based on a ruling by the IRD on the structured finance deals the banks operated with their parent companies in Australia (4). All of them are disputing the tax claims.
A windfall in tax revenue from the financial sector helped Dr Michael Cullen fund a $500 million cash injection for the transport network. The tax take for the 11 months to the end of May 2005 ran $544 million ahead of forecasts, with corporate tax accounting for $368m of the difference. “A significant portion of it is due to some large, unexpected payments from the financial sector relating to previous tax years,” Cullen said (5). While Cullen was bound by tax law not to reveal who had made the payments, officials said it would be “safe to speculate” that the tax windfall relate to the long running dispute between the Inland Revenue Department and the four main banks over their tax arrangements. In October 2004 Michael Cullen predicted new tax rules would see the foreign-owned banks pay up to $360m more a year in New Zealand tax (6).
For an indepth commentary on the information the BNZ and Westpac have provided to the public on their tax, and on how they might structure their financial arrangements to avoid tax, please see Sue Newberry’s Financial Analysis, which follows the Judges’ Report.
Political Interference And Lobbying:
A mere month and a half prior to the 2005 election, Westpac’s Chief Economist, Brendan O’Donovan, released some highly inflated costings of Labour’s flagship policy of interest-free student loans.
"Our position is not to comment on election issues; that's a strong preference. This one, I think, carries just such large fiscal risks and potential long-term impact on the economy, I felt beholden as an economist ... to try and get sanity into the debate. In our view, this election lolly would result in a chronic case of tooth decay. We implore that the 'free interest' proposal is not made an election pledge" (7) (Westpac Chief Economist Brendan O’Donovan).
This was simply blatant political interference in an election campaign by an overseas-owned bank. Given the lobbying experience of Mr O’Donovan and Westpac, it would seem far too charitable to put down Westpac’s actions to idyllic political naivety. O’Donovan predicted the annual bill for Labour’s election pledge would far exceed Education Minister Trevor Mallard’s estimate of $300 million, and claimed the cost could be as high as $1.1 billion a year. He then took a mid-point between the figures to estimate the cost of the policy as $700 million a year.
While he conceded that his figures were “extreme”, the call for sanity did not stop Mr O’Donovan from making some wild assumptions. He assumed interest free loans would give students an incentive to borrow as much as they were entitled to, and every student would do so. It is worth noting that similar claims were made in 1999 when Labour introduced the interest-free-while-studying policy, but these fears simply did not eventuate, as the percentage of students with student loans only increased from 50% to 55% between 1999 and 2004. More critically, O’Donovan failed to take into account the fact that part time students can not access as much money as full time students. This could affect the accuracy of any estimate quite considerably, as most students without a student loan are part-time, and part time students do not qualify for the living cost component of a student loan.
Education Minister Trevor Mallard dismissed Westpac’s figures as “inflammatory, self-motivated garbage”, and said the bank had its own "very selfish reasons" for issuing its analysis. Westpac offered a service to graduates, refinancing up to $10,000 of student loans at a discounted rate in an attempt to gain valuable follow-on mortgage business, and stood to lose millions of dollars of loans business from Labour's policy. "It is disappointing that this international company did not declare its conflict of interest" (8).
Looking a little wider, there are also other possible conflicts of interest. Papers released under the Official Information Act in October 1999 revealed that the then Tertiary Education Minister Max Bradford looked at proposals to sell the student loan scheme to Westpac. Removing the interest on student loans means that the scheme is unlikely to ever be a commercial prospect for the private sector.
Westpac said it was disappointed with Mallard’s comments and claimed its economists possessed “editorial independence” to “preserve the integrity” of their analysis (9). “In the case of the proposed student loans policy the cost analysis was positioned to calculate the extreme worst-case fiscal costs”. But only calculating the “worst case” scenario is hardly an objective economic analysis aiming for accuracy. It is what you might expect from an opposition political party. Ironically, Westpac’s flawed costings of the student loan policy were considerably higher than the initial estimates issued by National MPs.
The final, more detailed Treasury costings of interest free student loans, released by Finance Minister Michael Cullen in December 2005, estimated the policy would cost $218 million in 2006-7, rising to $269 million in 2009-10. “This is in line with, although a little lower, than the Labour Party’s costings and significantly lower than the Treasury scenario released during the election campaign,” (10) Dr Cullen said. This demonstrates that Westpac’s figures had even less credibility.
On An Ideological Crusade
Other comments made by the bank economists suggest they are fronting a Rightwing ideological crusade on behalf of their owners. Westpac Chief Economist Brendan O’Donovan has criticised Government spending plans such as Working for Families and advocated for tax cuts funded through greater Government borrowing. His comment about “a chronic case of tooth decay” in regards to the student loan policy suggests his objection is more “moral” than economic. BNZ Chief Economist Tony Alexander has lobbied in favour of tax cuts and moving the bulk of resources to the hands of the private sector. Perhaps Mr Alexander deserves some credit for his attempt to appear more even-handed during the election campaign. However the most effective way to avoid perceptions of political interference may be not to comment on party policy proposals at all.
If It Was Up To Westpac And The BNZ There Would Be No Pension
Westpac economist Andrew Fung and Tony Alexander of the BNZ have both attempted to blame the existence of New Zealand Superannuation for our low rates of savings, and claim New Zealanders are not given enough “incentives” to set up private superannuation funds. "The problem is, you're not giving people the incentive to save, when you're sort of saying: `We're going to give you an income'” (11). Mr Fung claims it is a problem that Super is “viewed by people as a retirement income”, as they pay for it via taxation. Most Kiwis would argue that isn’t so much a problem, but precisely the point of publicly funded superannuation. For most Kiwis “super” will be their primary “income” once they turn 65. Mr Fung’s advice that New Zealanders should regard superannuation as “a safety net rather than a pension”, suggests the banks would prefer a system where superannuation was no longer a universal entitlement and the Government put its money into providing “incentives” for people to start private savings schemes. It just so happens that the banks already sell such products. Thankfully, the banks do not have any great hopes of this ever coming to pass. Tony Alexander says that New Zealand Super will remain because of political pressure. "That's where the voting power is going to be, end of story”.
Regulatory Supervision: The Banks Bully; Cullen Folds
All four banks have applied sustained political pressure on the Government to transfer the regulatory authority powers of the Reserve Bank over to the Australian Prudential and Review Authority (APRA) or a single trans-Tasman regulator run on Australian lines (12). They enlisted the help of Australian Treasurer Peter Costello, who pressed strongly for a single regulator. Cullen is thought to be sympathetic to the idea, and he concedes it could be a potential outcome of moves towards a single economic market.
Westpac Chief Executive Ann Sherry wrote to all New Zealand MPs and warned that the Australian banks could pull out of New Zealand if there was no agreement on a single trans-Tasman regulator. This thinly veiled threat was dismissed as a “joke” by Tim Brown of investment firm Infratil, who doubted the banks would turn their backs on the combined profit of $2 billion a year they gain from the New Zealand market. The Director of Banking Studies at Massey University, David Tripe warned that “the Australians appear to be waving around some conditions which are pretty extreme and making some comments which are of doubtful veracity” (13). In this context, the words “doubtful veracity” means that Tripe believed the comments made by the banks did not conform to facts and were of doubtful accuracy.
In a joint 36 page report the Reserve Bank, Treasury and the Ministry of Economic Development warned Cullen that the push for a single regulator could undermine New Zealand’s tax base, lead to an exodus of foreign investors in the event of a banking crisis and restrict the decision-making ability of the Government during such a crisis. Reserve Bank Governor Allan Bollard warned Cullen that an inevitably Australian-dominated regulator “could impose significant economic costs on New Zealand” (14).
In a speech to a conference at the Federal Reserve Bank of Chicago, Bollard explained some of the difficulties faced by the Reserve Bank attempting to act as a regulatory authority in an economy dominated by foreign owned banks.
“There can also be conflicts of interest between the home and host authorities in the allocation of capital and risks across a multinational banking group. The home authorities have an interest in retaining as much capital within the home jurisdiction, and particularly within the parent bank, as possible. Conversely, the host authority would like to see a reasonable portion of the group's capital vested in the local subsidiary. A similar dichotomy of interest applies in respect of the spread of risk across the banking group. In times of stress, the allocation of capital and risk within the group can be crucial. Tensions between home and host authorities can quickly become apparent in those circumstances. This is especially so when the bank subsidiary is under-capitalised and the host authorities are requesting the parent bank to inject more capital. The situation is even more complicated when the bank in distress is a branch of a foreign bank. The home and host authorities may also have different interests in deciding the response to a banking crisis. The home authorities' primary interest and (generally) their primary statutory duty is the maintenance of stability in the home financial system” (15).
Costello has already met with some success, convincing Cullen to agree to a joint trans-Tasman Council on Banking Supervision to allow “seamless regulation” of banks between Australia and New Zealand. At the conclusion of their annual bilateral meeting in February 2006 Cullen and Costello announced both governments would legislate to ensure the APRA and the Reserve Bank collaborate on regulatory issues and avoid actions that could affect the financial stability of either country. While this stops short of a trans-Tasman regulator for now, both these moves are likely to increase the lobbying power of the Australian banks.
Hooray! A Regulator That Actually Does Some Regulating
In the last couple of years the Reserve Bank has moved to a tougher regulatory stance towards the foreign banks, placing greater restrictions on core bank work being “outsourced” and insisting Westpac change from being a branch of its Australian parent to become a wholly-owned subsidiary. Westpac, the only Australian bank not to be incorporated in New Zealand, spent most of 2004 arguing with the Reserve Bank over this, dismissing the possibility of a collapse as “a one in 900 year” likelihood. But regulatory bodies do and ought to have a responsibility to prepare as much as possible for all eventualities – if the health authorities dismissed the possibility of a bird flu outbreak and did nothing they would be justly criticised. Westpac put up a counter-proposal to its regulator to run its New Zealand operation as a “buttressed branch”. Thankfully the Reserve Bank held its nerve and forced Westpac to take moves to incorporate in New Zealand, a process that could take two years. Dr Alan Bollard told a Sydney business audience he aimed to give the New Zealand banking system “more resilience in times of financial stress….Banks on occasion do get into trouble, and probably more than is commonly thought” (16) pointing to the recent $A360m foreign exchange trading scandal at National Australia Bank, the owners of the BNZ.
The incorporation of Westpac is expected to provide New Zealand depositors with greater protection in the event of an Australian bank failure, as current Australian law gives priority to Australian customers having first call on the funds and places restrictions on the claims of overseas customers. While Westpac claims that a piece of New Zealand legislation, the Westpac Banking Corporation Act of 1982, offers protection for customers, it is not clear whether New Zealand or Australian law would take precedence in the event of a bank finding itself in financial trouble. As an incorporated company in New Zealand Westpac will have its own board of directors which must act in the best interests of the local operation. The Reserve Bank also has the right to veto the appointment of directors and the chief executive of the local bank.
The Reserve Bank also wants to tighten the rules regarding the outsourcing of the information technology (IT) systems of the banks. These changes are designed to make it harder for the banks to outsource their IT systems to third parties, and make it virtually impossible for them to merge them with their parent businesses in Australia. This is also motivated to provide another “buttress” in the event of a collapse, as a New Zealand operation is more likely to be affected if it is overly dependent on the IT systems of its Australian parent.
In November 2004 the Reserve Bank vetoed a proposal by Westpac to physically move its mainframe computers to Australia. Westpac’s Chief Information Officer, Ross Hughson, said that the Reserve Bank had sent a “clear message it wants Westpac to keep its infrastructure in New Zealand. We can’t argue with the regulator though, clearly, people have the right to lobby....If you read the policy dictates given to ANZ and likely to be given to BNZ, then that is what is going to happen”. ANZ National Bank has already agreed to move the processing of ANZ bank accounts back to New Zealand from Melbourne, and the BNZ is expected to follow suit.
In submissions to the Reserve Bank, released under the Official Information Act, the Australian banks voiced strong protest at Bollard’s outsourcing proposals and attempted to argue that the new rules would make it harder to rescue their NZ subsidiaries, should they ever run into financial trouble. In April 2005 BNZ, Westpac and the Australian Bankers’ association called on the Reserve Bank to stop work on a new outsourcing policy and give the issue to the Trans-Tasman Council on Banking Supervision (17). The Reserve Bank rejected this call, reminding the banks the Council is “not a policy-making body” and that the submissions were “out of kilter with what the Council has been set up to do” (18).
Yet Cullen appears to have disregarded Bollard’s advice yet again, as Cullen and Costello also agreed during the 2006 bilateral to implement the legislative changes recommended by the Council on Banking Supervision. The Reserve Bank recognised the proposed changes would have immediate relevance to its current debate with the Australian banks “because intervention in outsourcing arrangements is explicitly defined as an action which is detrimental to financial stability in the other country” (19). While the Reserve Bank maintains that there still needs to be some restrictions on the outsourcing of key functions, the proposed legislative changes will give the banks “greater flexibility about the trans-Tasman location of some of their functions”. With the help of our own Finance Minister Michael Cullen, the Australian banks appear to have won the outsourcing war.
Banks Damage NZ Economy In Greedy Pursuit Of Short Term Profits: Banks Stoke Inflation
Total household debt is now about $128 billion, up a staggering $32b in just two years (20). Rising debt and rampant spending are cited by the Reserve Bank as reasons to raise interest rates. In November 2005 the Reserve Bank Governor, Alan Bollard, accused the banks of pressuring inflation through their lending practices, and urged them to look beyond short term profits and market share (21). He also warned that the interests of the shareholders of the larger banks would not be served by the banks promoting loans to people who could not afford them. In response, Westpac and the BNZ claimed they were only responding to customer demand and rejected Bollard’s view they were playing a role in fuelling inflation. Peter Thodey said the “very competitive mortgage market” in New Zealand was “healthy for consumers and providers alike”.
Finsec general secretary Andrew Cassidy said the banks could not be blamed for the entire inflation problem, but their actions played a part. He highlighted how performance pay targets can place greater pressure on interest rates. Such targets provide a greater incentive for bank employees to sell mortgages, credit cards and other forms of lending, as such “sales” are rewarded more highly than savings products. “The banks consistently raise the targets on their employees as they seek to take market share off each other. This means a customer walking into BNZ will be meeting staff who will be under pressure from their employer to encourage them into debt. The economic effect of such large growth can be inflationary pressure….Finsec believes that these customer debt targets have now reached crisis point” (22). Finsec is the union of finance sector employees.
BNZ sales staff are set a target of 10,320 points each per year. They get 12 points for every $10,000 of home loans on a variable interest rate that they sell but only three points for every $10,000 of term investments. Westpac customer service workers get ten points towards their annual target of 8575 for opening a new account and an extra 25 points for selling a credit card. They get five points for every $10,000 of home loans they sell and five points for every $1,000 of personal lending.
As the banks often compel staff to focus on up-selling products to customers, these targets stand in clear contradiction to the claims of Peter Thodey and Ann Sherry that the banks are merely responding to customer demand, as Finsec Campaigns Director Karen Skinner explains. “The major banks are driving inflation and attempting to grow their market share by imposing ever increasing sales targets on their staff,” (23).
BNZ Santa Gives Debt For Christmas
During the 2005 Christmas shopping season, the BNZ sent out an offer of a pre-approved credit card to non-bank customers using a Fly-Buys database. Many people who received the letters would not normally be able to get a credit card. Recipients included bankrupts, beneficiaries and people with mental impairments. With many families struggling to make it through the expensive Christmas season, an offer of $3,000 to $5,000 would be hard to turn down. Consumers Institute head David Russell called this practice of the BNZ “ethically reprehensible…particularly if they are sending it to people who are going to struggle to meet the debt they are likely to run up on the pre-approved card” (24).
Banks Encourage Their Customers To Get Into Debt
The Banking Ombudsman has criticised the practice of “inertia selling” where the banks unilaterally raise the credit card limits of their customers, relying on the target not to take steps to decline the offer. Chief investigator Susan Taylor says the Ombudsman’s Office found that “often the only criteria the banks consider is whether the customer has met the minimum monthly repayment. But meeting the repayment on a $2,000 credit limit is quite different from meeting it on a $5,000 limit”. The Consumers Institute also criticised Westpac when it heralded its decision to lower minimum monthly payments from 5% to 3% as “good news” for customers. “Of course it’s not good news,” said Russell. “It’s about keeping people in hock for longer” (25). Research by Massey University’s Centre of Finance and Banking found that higher credit card limits encourage people to spend more and results in higher outstanding balances (26).
Banks Face Criminal Charges Over Hidden Credit Card Fees Ripoff
Anyone who has made use of a credit card overseas or to make a purchase over the Internet may have been hit with a hidden currency conversion fee that banks and finance institutions have conveniently forgotten to inform their customers about. In November 2004 the Commerce Commission announced it was pursuing legal action against five major banks and two credit card transnationals for not disclosing their international currency conversion fees. Westpac, BNZ, ASB Bank, TSB Bank and ANZ National, are set to face criminal prosecution for breaching the Fair Trading Act, alongside credit card companies American Express International (NZ) and Diners Club (NZ). Warehouse Financial Services (where everyone gets a billing?), a partnership of Westpac and the Warehouse, is also facing charges. Commerce Commission Chairwoman, Paula Rebstock, said the amount of undisclosed fees run into “at least the tens of millions”.
In April 2004 the California Superior Court ordered Visa and Mastercard to repay up to $US800 million in undisclosed conversion fees, setting a helpful precedent for the Commerce Commission action. The US judgement is still under appeal and no American consumers have received any fee refunds yet. Ms Rebstock expects the legal action in New Zealand to take up to two years, so Kiwis will also have to wait for their refunds. The banks and the financial institutions made their first appearance in the dock in April 2005. Let us hope there are some hidden court costs.
Low Wages, Bullying, Stress And Sales Targets:
According to Statistics New Zealand, labour costs for the finance and insurance sector (which is dominated by the four big banks) have lagged behind the average pay increases gained by the general population (27) over the past four years. As the majority of bank employees are women this demonstrates that finance sector employers are contributing to the growing gender pay gap.
Westpac, in a clear demonstration that management are not averse to exploiting their underpaid New Zealand workforce, announced in September 2004 that it might return some more back office processing to New Zealand. “Westpac…is keen to take advantage of New Zealand’s low wages as part of a programme to reduce the $1.6 million in costs incurred each year in the business, technology and services divisions” (28). According to Finsec, the remuneration offered to Westpac workers continues to lag behind what is offered by the other banks.
This also suggests the push for a “single economic market” by the banks is primarily a cost saving measure. Harmonisation is fine when it is protecting the profits and the interests of the bankers, but it is an entirely different story when it comes to looking after the interests of their trans-Tasman workers. A real “single market” ought to include trans-Tasman standards on wages and conditions, so perhaps our Government should be told in no uncertain terms to stop pushing the so called “single market” in harmony with the corporates, unless the corporates make some concessions themselves. ANZ National continues to refuse to pay its New Zealand workers the double time penal rates it offers Australian staff for working in the weekends.
Call Centres: 21 st Century Sweatshops?
At BNZ all telephone conversations made by call centre staff are taped and randomly chosen for pay assessments, where workers can be marked down for using the wrong words or scripts. In one instance a call including an error was played in front of the whole team while the person who took the call was asked to leave the room while the rest of the team critiqued the call. Call centre operators have been disciplined for being as little as half a minute late signing on to their phones. All of these factors affect their Performance Management Framework (PMF) rating which affects their take home pay.
In a clear cut case of bullying, a pregnant woman working at a Westpac call centre was told she would have to make up time after work if she went to a specialist appointment. A Finsec organiser informed the team leader of the bank’s responsibilities under the Parental Leave Employment Act. The team leader then demanded a doctor’s certificate from a 20 weeks pregnant woman to prove she was pregnant and that the specialist appointment was related to the pregnancy.
Call centre staff at Westpac are closely monitored. An employee making a three minute call to their union was threatened with having to make up the time at the end of the day. Staff have been spoken to for taking more than three toilet breaks during the day, and if they spend more than 17 minutes not ready on the phone over an eight hour shift.
Not Family Friendly
Some of the employment practices at the BNZ and Westpac make them far from family friendly workplaces. Workers are regularly unable to take holidays at the same time as their children, and are sometimes asked to return from holidays due to their workplace being understaffed. A Samoan worker at the BNZ was refused leave to visit her son over Christmas, despite asking nine months in advance and being the only one in her team to ask for leave on those dates. The bank refused because the period included December 16, the busiest banking day of the year, despite assurances from her team that they would cope. Westpac staff in Takaka are almost never allowed leave over the Christmas period, as it is the busiest time of the year for the branch. Bank staff are forced to find a way to look after their children and work at the same time, as the only childcare facility in Takaka is closed during the Christmas period. Westpac refuses to send temporary replacement staff to Takaka from other areas to allow their workers to have a holiday.
Stress And Sales Targets
Stress is widespread among workers at the BNZ because of serious understaffing and unreasonable demands placed on staff in the form of ever increasing sales targets. Entire offices have been known to work late or miss morning and afternoon tea (without compensation) and workload pressure has forced some workers to come to work despite being sick. Stress and pressure also affects their families. Westpac staff reported similar experiences. One BNZ manager insisted that staff put their hands on their head and answer questions about their sales targets for the week. They could not lower their hands until they had given the answer.
A BNZ branch in Taihape won an award in 2005 for being the best branch in the whole country. Sadly, BNZ does not appear to give the staff adequate recognition for their effort, as workers there have been handed a PMF rating of “Needs Improvement” because they cannot meet the unrealistic targets set by the bank, meaning they will not receive the negotiated increase in their base salaries.
To make matters worse, under a new aspect to the PMF system BNZ staff are expected to promote mortgages and home loans in their own time. Under the title of “community responsibility” staff members are expected to promote the bank outside of work such as at social gatherings. As a sponsor of the 2006 Commonwealth Games team, the BNZ asked back office staff to adopt an athlete and fundraise money through cake stalls and the like. The bank makes an after tax profit of $541 million and still asks its staff to run a cake stall?
In December 2005, Westpac staff who are members of Finsec, voted to issue a public statement to the community:
“Westpac sets staff targets to sell large amounts of lending and other products to customers each year. As Westpac staff we are concerned about these targets, and how they are managed. If staff don’t reach these arbitrary targets, they miss out on pay. And our jobs might even be threatened. For us these targets cause stress, frustration and lost pay. For you, our customers, they can also cause stress and frustration. Westpac staff don’t like doing that to you. We want to be paid for giving good service and quality advice”.
In order to demonstrate their resolve on the issue, Westpac staff held a strike on December 19, 2005 – the last banking day before Christmas. In a provocative move, on January 5, 2006, Westpac gave all non-union employees a pay rise prior to the conclusion of negotiations with the union. This meant that non-union staff were being paid more than union staff.
Following a four month dispute, union members on February 10 voted to accept a 5.2% pay offer and a commitment from Westpac to develop a new pay progression system that will not be based solely on targets. Westpac staff and Finsec ought to be congratulated for this small but significant step towards resolving the issue. One hopes the bank will develop a pay progression scale that rewards service and not just sales.
Westpac and the Bank of New Zealand are the worthy winners of the 2005 Roger Award.
(1) Jesson, Bruce (1999), “Only Their Purpose Is Mad”, Dunmore Press, Palmerston North, p108.
(2) NZ Herald, 20/10/05, “ Clark seeks ‘A-list’ advice on direction to take”, Fran O’Sullivan.
(3) Westpac Press Statement, 2/8/05, “Westpac responds to Education Minister’s comments”, http://www.scoop.co.nz/stories/BU0508/S00027.htm
(4) Press, 24/6/05, “$500m tax windfall to fund transport”.
(5) Press24/6/05, “$500m tax windfall to fund transport”.
(6) Press,1/10/05, “Westpac says tax was paid”.
(7) NZ Herald, 2/8/05, “War of words heats up on student loans”.
(8) Mallard, Trevor, 1/8/05, “Westpac’s dodgy analysis driven by selfishness”, http://www.scoop.co.nz/stories/PA0508/S00021.htm, Press Release
(9) Westpac Press Statement, 2/8/05, “Westpac responds to Education Minister’s comments”, http://www.scoop.co.nz/stories/BU0508/S00027.htm
(10) Cullen, Michael, 19/12/05, “Interest free student loan costings”, Press Release, http://www.scoop.co.nz/stories/PA0512/S00277.htm
(11) Dominion Post, 27/9/05, “Few kiwis saving for future”
(12) Press(27/9/04), “BNZ backs Aust-NZ watchdog”.
(13) Press, 16,4/05, “Bank debate heats up”.
(14) Press24/2/05, “Cullen warned of bank regulator costs”.
(15) Bollard, Dr Alan, 2/10/05, “ An Address to the Federal Reserve Bank of Chicago Conference: Systemic Financial Crises - Resolving Large Bank Insolvencies”, http://www.rbnz.govt.nz/speeches/0158779.html#TopOfPage
(16) Press, 13/9/04, “Push on for tighter controls on banks”.
(17) Press, 2/4/05, “Banks buck policy view”
(18) Press, 7/4/05, “ Bank outsourcing policy stays put”.
(19) Reserve Bank, 23/2/06, “Legislative changes proposed by the trans-Tasman Council on Banking Supervision”, http://www.rbnz.govt.nz/finstab/banking/supervision/2420258.html
(20) Press, 3/12/05, “Pulled up for pushing credit”, James Weir
(21) Dr Alan Bollard, 2/11/05, “Housing debt, inflation and the exchange rate”, speech to EMA AGM, http://www.rbnz.govt.nz/speeches/2157629.html#TopOfPage
(22) Finsec, December 2005,”‘Submission to Reserve Bank on the effect of bank sales targets and performance management systems upon consumers and the economy”.
(23) Press, 10/11/05, “BNZ profits grow 15%”.
(24) Press, 2/12/05, “ BNZ rejects accusation over credit cards”.
(25) Press, 8/10/05, “Danger of debt”
(27) Between 2002 and 2005 labour costs for the finance and insurance sector increased by an average of 1.725% (c.f. average of 2.125% for the whole population)
(28) Press(20/9/05), “Westpac plans to shift some processing functions to NZ”.
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