When you run a lucative cartel, you are used to getting what you want from regulators but, that said, the recalcitrance and pig-headedness of the Australian banks in New Zealand is still something to behold, as Terry Teller reports.

Sometimes banking executives think people are dumb. I know that is not an earth shattering statement or insight, but there’s an example this week of how the executives at Westpac and ANZ think we’re all a little thick and will swallow any old line spun by them.

Its not a big deal in sofar as Westpac is concerned, but it’s a little fib that makes you wonder about the quality of people Westpac has stationed over there, especially with the well-regarded Anne Sherry running things.

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It is the second slip up by Westpac in the space five months on the same issue, the moving of the banks mainframe computer from New Zealand to Australia.

The central point was raised in a story in Wednesday’s Australian Financial Review by Tony Boyd which said “RBNZ delays Westpac Reforms”. Well, if the sub had read the story, they would have realised the story suggested something different. Perhaps it was not understood.

Tony Boyd said in his story that Westpac has been forced to delay the transfering of its NZ mainframe computer to Australia by the RBNZ.
“Westpac wants to transfer the mainframe processing as part of outsourcing its NZ back office processing to IBM Global Services.

“Westpac said yesterday it had postponed the decision while the RBNZ finalised its new policy on out-sourcing”

“The RBNZ however said in a statement that it expressed ‘concern to Westpac that their planned moving of their mainframe processing was inconsistent with the Reserve Bank’s stand alone capability requirements’.

“The Reserve Bank did not consider that Westpac’s proposal was sufficiently robust in terms of those objective’s,” the bank was quoted by the AFR.

The story then went on to say, “Westpac executives in New Zealand said that the central bank never expressed specific concerns about moving the mainframe to Australia”.

Now isn’t that odd. Those chaps over there in new Zealand (but hopefully not their bosses at head office in Sydney) haven’t heard of the internet, or Google.

Check out this Age story we found which reported the following:

“The Reserve Bank of New Zealand has taken to task Westpac group executive Ann Sherry for comments she made to analysts about managing shared services for the bank’s Australian and NZ subsidiaries.

“Ms Sherry told the annual briefing of analysts last week that Westpac had the RBNZ’s ‘full knowledge and agreement’ about moving its mainframe-based retailing processing out of New Zealand.

“Not so, said the RBNZ, which demanded Westpac retract the comment and defuse any suggestion that it was getting a better deal than its rival, the newly integrated ANZ/National Bank of New Zealand, which must retain its retail processing in NZ.”

Now is that knowledge, or isn’t that knowledge?

And the RBNZ has been telling all the banks here and in New Zealand for a year about the new policy on stand alone capability.

The ANZ has been running into the RBNZ as Crikey has reported on three occasions this year, including this instance. But, judging by comments from John McFarlane last week, they are slow learners.

Now we admit that reading Crikey isn’t high on the list of things to do at Westpac New Zealand, but it would be pretty plain from talk in the industry, plus chat inside Westpac itself, that the RBNZ was taking a much tougher line.

You have to wonder if Westpac has a good understanding of the RBNZ, or whether it is playing hardball, in a nice, polite, Big Australian Bank way.

Westpac has a much bigger problem. It is trying to convince the RBNZ not to force it to incorporate in New Zealand. At present it is a branch office, but the RBNZ wants banks in NZ to be capable of standing alone and surviving any problem in their Australian parents. The New Zealand banking industry is about 80% Australian owned and remember how Westpac almost collapsed in 1992 – that’s a short time ago in banking regulation.

If Westpac is forced to incorporate it will trigger a big capital gains tax bill as their investment in New Zealand has been highly profitable.

A spokesman for Westpac was quoted in the AFR as saying that “we believe we have the appropriate systems and procedures in place to satisfy the RBNZ’s failure management objectives and its prudential supervision.”

Hmmm, if so, why are the Kiwis unconvinced?

There’s an old saw in banking, never prod a regulator unnecessary. They might wake up to what you are doing. Cruel and unfair to the RBNZ which is doing all the prodding of a seemingly recalcitrant group of Australian banks.

A glance at the preceding page in the AFR shows the size of the teeth the RBNZ possesses. The ANZ said in its latest profit statement that the “divergence” in banking regulations between Australia and NZ had cost it an extra $NZ31 million ($A29 million) in acquisition costs for the National Bank of NZ.

That again is misleading. The ANZ knew of the RBNZ’s policies before it made the acquisition late last year. It was not sprung upon the hapless Australians after the transaction was completed. The stand alone capability and other rules were there.

It’s just that the ANZ thought it could negotiate them away. There will also be a $NZ12 million additional cost each year for stand alone disaster plans.

ANZ CEO John McFarlane said “ We were surprised because all the rhetoric had been around an emerging convergence of regulation between Australia and New Zealand”.

Well that might have been his understanding, but it is at complete variance with reality. The NZ Reserve Bank Governor, Alan Bollard made this speech in November 2003, just after the ANZ move on the National

That seems pretty clear, even to the dunderheads at Westpac in NZ, but apparently not to Big John of the ANZ nor to Anne Sherry and others at Westpac.

Much in the way the ‘story’ on the integration of the two banks’ NZ computer business is now being ‘sold’ as a cost saving.

The ANZ name in the NZ retail banking and small business market is not good. In fact it has the lowest credibility of all. The ANZ has realised this and has decided to keep separate systems for the ANZ and the National Bank, otherwise customers would have walked elsewhere.

There was an $80 million cost in this integration. Strange isn’t it that something was going to produce savings was going to cost so much in terms of capex and customer relations.

Sense has prevailed, but it does make you wonder about the comments on regulation in New Zealand by McFarlane.

Are Australian banks as thick as they seem from this story?

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Australia has spoken. We want more from the people in power and deserve a media that keeps them on their toes. And thank you, because it’s been made abundantly clear that at Crikey we’re on the right track.

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Peter Fray
Peter Fray
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