22 October 2008

BNZ profit of $657,000,000 shows lending regulation needed

Finsec, the finance workers union, is calling on the government to impose regulation to promote ethical lending in exchange for wholesale deposit guarantees in light of the BNZ's $52 million profit increase announced yesterday.

"The banks want the Government to guarantee the borrowing they do to fund their lending. At the same time they are sending ever increasing profits overseas they expect the tax payer to give them a blank cheque to underwrite their business," said Finsec Campaigns Director Andrew Campbell.

"While the average person is tightening their belt, the banks want to carry on as if it were business as usual. We say they can't have their cake and eat it too," said Campbell.

"If the BNZ and other banks want the tax payer to underwrite their borrowing, then customers need and deserve guarantees that their lending practices will be fair and ethical. The BNZ says it has a conservative approach to lending, however we know that local lending is driven by unreasonable sales targets for staff," said Campbell.

"The BNZ has just increased its referral targets for tellers by 50% and for customer services officers by 66.6%. That means BNZ customers will be coming under more pressure to get into debt or take on other bank products," said Campbell.

"The $106 million increase in bad debt provisions indicates that potentially inappropriate lending is already occurring. BNZ staff have said the increase in targets forces them to act in ways that may not be in the best interests of their customers," said Campbell.

"All banks have a role to help the country through the current financial crisis. That means changing the lending behaviours that are not suitable to the tough times we are now in," said Campbell.

Finsec released a report on Fairness in Lending in August. The key recommendations of that report are attached to this media statement. A full copy of the report is available at:

http://www.finsec.org.nz/betterbanks/Fairness%20in%20lending%20report%20 (final).pdf

ENDS

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