Neil Sands
A parliamentary select committee has declined to back a NZ First bill that aims to curb “woke” banking by limiting financial institutions’ right to refuse services, opting instead to monitor the situation during consultations with banks.
The private member’s bill from NZ First MP Andy Foster was drafted in response to concerns that banks were withdrawing services from individual and corporate entities on the basis of their political beliefs or the economic sector in which they operate.
Introducing the bill, Foster said businesses involved in the agricultural, mining and motoring sectors had all complained about “debanking” because of climate-related conditions imposed by banks, although he said other fields, such as the sex trade, were among those that had experienced discrimination based on moral grounds.
“Some will say, ‘Well, those businesses are bad, particularly around climate emissions, so good riddance and well done to the banks’. But that’s a very dangerous pathway, because who is next?” Foster asked Parliament when the bill passed its first reading in May last year.
His proposal – titled the Financial Markets (Conduct of Institutions) Amendment (Duty to Provide Financial Services) Amendment Bill – would impose a new duty for banks, forcing them to provide financial services to all customers unless there were valid legal or commercial grounds.
Under the bill, individuals would face up to three months’ imprisonment or fines not exceeding $50,000 for breaches, with a penalty of up to $500,000 for corporations.
Debanking issue ‘remains live’
The bill was sent to the Finance & Expenditure Select Committee for consideration, attracting more than 1,400 submissions, with 59% opposing it, 32% in favour and 9% unclear.
The committee reported back last week but made no recommendation on whether Parliament should pass or reject the bill, instead merely asking the House to note its report.
It said recommendations included in the committee’s report into banking competition, released in August last year, would help address concerns about the need for banks to be transparent about how climate-related policies affect their lending practices, and to tell agricultural customers why loans had been declined.
“We also indicated in our report that we will be requesting six-monthly updates from banking regulators and entities about such things as improvements to the transparency of transaction accounts,” the committee said.
“These updates will be an opportunity to ask about the provision of banking services. We consider that our recommendations, as well as our ongoing scrutiny, would achieve the outcomes the bill seeks to accomplish.”
In an online commentary, Buddle Findlay’s Andrew Suggate and Janet Liu said the select committee report “likely marks the end of the road for this bill”.
“Banks, insurers and other financial institutions may be relieved to avoid further compliance requirements without obvious benefits to their customers or their commercial interests,” they said. “However, with the increasing importance of ESG (environmental, social, and governance) factors clashing with financial inclusion and political imperatives, we may not have seen the last attempt at this type of legislation.”
A briefing note from Chapman Tripp also concluded “the issue of debanking and access to banking (and insurance) services remains live”.
“It is clear that, regardless of the committee’s recommendation, there is a significant interest from the public in this issue, and a material level of concern about access to banking services,” it said.
‘Regulatory over-reach’
The committee said opponents of the bill argued that ESG factors were an important part of commercial considerations for financial institutions and Foster’s proposal, particularly the criminal penalties, represented “regulatory over-reach” in a free market economy.
The New Zealand Law Society (NZLS) said in a submission to the committee that the bill’s proposal for significant reform was not underpinned by comprehensive policy work, creating concerns about its workability.
“As drafted, the bill will override the common law principle that businesses are generally free to choose their contractual partners and terminate relationships with reasonable notice,” the NZLS said .
“It will also override existing contractual provisions to that effect. It is significant reform, seeking to address a complex issue.”
The committee said the bill’s supporters were mostly from rural areas or involved in the natural resources sector and were concerned about challenges to accessing banking services, such as transaction accounts and credit.
“They considered that they are unfairly targeted and discriminated against due to different ideologies, offshore frameworks, and social pressures,” the committee report said.
“These submitters said access to financial services is a fundamental right that all New Zealanders are entitled to.”
The right to banking services was a core issue in the legal dispute between BNZ and the Gloriavale religious community, when BNZ successfully argued in the Court of Appeal that it was within its legal rights to reject Gloriavale as a customer due to concerns about human rights.
LawNews approached Foster’s office to ask if he would pursue the bill, which he revised to focus on two key issues – the right to have a bank account and the right to know why a credit or insurance application has been declined.
We did not receive a response by publication deadline.
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