Delivering in a crisis

Roger Beaumont, Chief Executive

Published in KPMG’s Financial Institutions Performance Survey Review of 2020, 23 February 2021

To describe 2020 as a memorable year might be the understatement of the century. 2020 made an indelible impression on most of us because of many things, including a conclusion to Brexit negotiations, an end to the Trump presidency, and our own general election which returned the government with an unprecedented majority in the MMP era. Above all else was the Covid-19 global pandemic that caused huge human loss and suffering and rocked economies the world over, and continues to do so.

We’ve never seen such a global reaction to a pandemic as we have with Covid-19. New Zealand’s response, in the face of significant uncertainty at the beginning of the health crisis, is now widely acknowledged as among the world’s best. We closed our borders for the first time ever and had a comprehensive lockdown early on. That set us up with a solid foundation to respond to later community outbreaks.

Supporting financially affected customers

Our banks played a role as part of the ‘team of five million’ coordinated response. Working with the government, the Reserve Bank and credit reporting agencies, banks moved quickly to offer loan repayment deferrals and reduced loan repayments for customers financially affected by the pandemic. That provided immediate relief for many. Around $70 billion in household and business loans had all repayments deferred or reduced. Most of those loans are now back to normal repayments, thanks to the ‘NZ Inc’ response to the pandemic and consequently better-than-expected economic conditions.

At the same time, banks proactively contacted business customers to ensure they had access to credit and other support. In addition to reduced loan repayments and full deferrals, that included restructuring and consolidating loans, and providing short-term funding. Banks also supported the government’s Business Finance Guarantee Scheme.

With most bank branches closed during the lockdowns, the pandemic also hastened trends in banking that were already happening. While many people already enjoy the convenience of banking via the internet and on their smart phones, out of necessity the pandemic encouraged others to go digital. Banks helped those customers make the move to digital banking. They also supported older customers with dedicated prioritised phone lines to help them speak to someone about their banking needs.

Trialling regional Banking Hubs

In late 2020 we launched a year-long trial of regional Banking Hubs to test demand for basic banking services in regional communities where bank branches are no longer viable due to lack of customer demand. The trial, which is available to customers of ANZ, ASB, BNZ, Kiwibank, TSB and Westpac, is running in Twizel, Martinborough, Stoke and Opunake. Three of the sites have community partners, who are hosting the Hub and providing staff services.

The Hubs are based around a Smart ATM that provides for cash deposits (notes and coins) and withdrawals. Online banking is available on tablets at specially designed kiosks, and there are also direct phone lines to banks for personalised service, with staff on site to assist. Hub staff are not be able to provide financial advice or assist with individual bank products such as home loans but can help direct customers to phone or internet banking.

If the trials are successful, and they meet community demand, these Banking Hubs could form the basis of future banking services in small communities.

Other industry initiatives

In addition to providing support to households and businesses financially affected by Covid-19, and rolling out the Banking Hubs trial, the banking industry also delivered a number of other initiatives. They included becoming the first Living Wage accredited industry in Aotearoa. That meant 1800 employees and contractors, including security guards and cleaners, moving onto the living wage and gaining greater economic independence for themselves and their families. All of our 17 member banks, and NZBA itself, have been fully accredited.

Last year all of our banks also committed to paying suppliers of goods and services within two weeks. The banking industry understands how important prompt payments are to the viability of many businesses. That was especially the case during the early impact of Covid-19. This initiative complemented other banking support for business, as well the broader economic recovery.

We also launched guidelines to help bank staff serve customer needs. They build on the banking industry’s work following the Bank Conduct and Culture Review in 2018. They also reflect the Financial Markets Authority’s expectation that banks will serve customer needs. It’s all about making sure we continue to do the right thing by our customers.

The guidelines outline how banks will:

  • Treat their customers fairly
  • Recognise and prioritise customer interests
  • Give customers clear, concise and effective information
  • Design and provide products that meet customer needs
  • Provide good customer care
  • Identify, fix and learn from their mistakes.

The serving customer needs guidelines flow from the Code of Banking Practice, and sit alongside our guidelines to help banks meet the needs of older and disabled customers, which we reviewed in 2019.

The Code of Banking Practice sets out at a high level what customers can expect from their bank. The Banking Ombudsman often refers to the Code when considering complaints and disputes between banks and customers. To make the Code more accessible, we translated the Code into six other commonly used languages – te reo M­āori, Samoan, Tongan, simplified Chinese, Hindi and Korean.

NZBA’s rural lenders also entered a funding agreement with the Rural Support Trusts to offer support for farmers struggling with farm debt. The Farm Business Advice Support Fund, managed by Rural Support Trusts, pays up to $6000 for qualifying farmers for financial or business advice from an independent consultant. Under the agreement, the farmer’s bank shares that cost with the Rural Support Trusts.

Continuing to contribute to the recovery

We won’t forget 2020 for a while. We were hit with a wave of new experiences including lockdowns, staying in our ‘bubbles’, closed borders, social distancing, contact tracing and having to work from home. There was intense uncertainty at first, both socially and economically. By the end of the year we’d come through better than expected as a country. The banking industry was pleased to contribute to the recovery, not only by supporting financially affected households and businesses, but by delivering several other initiatives to make banking better in a year of crisis. In 2021 we’ll bed in that work and continue to support the recovery.