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Banks, insurers and non-bank deposit takers may be unable to deny consumers financial services if a Member’s Bill promoted by New Zealand First MP Andy Foster gets enough votes to pass.
The clumsily titled Financial Markets (Conduct of Institutions) Amendment (Duty to Provide Financial Services) Amendment Bill was drawn from the ballot last month and is being energetically promoted by NZ First as taking the fight to “woke banks”.
It would require financial institutions to offer financial services to all “consumers” unless there is a “valid and verifiable commercial reason” why not. Unusually in terms of the broader FMCA, this would include wholesale, retail and potential consumers. The Bill would prevent any consumer from being treated less favourably on the basis of:
- the prohibited grounds of discrimination under the Human Rights Act 1993 (which already apply to financial institutions)
- environmental, social, or governance (ESG) considerations
- climate-related reporting standards issued by the External Reporting Board, or
- the consumer’s industry.
The Bill expands the exceptions in the Human Rights Act 1993 from the freedom of commercial engagement, which was recently affirmed in the Gloriavale banking case, where the Court of Appeal supported BNZ's right to terminate its banking relationships as a proper purpose of its contractual rights.
The intent shown in the colourfully worded General Policy Statement is to “prevent registered banks “debanking” or withdrawing banking services from New Zealanders, body corporates or companies, whose political views or outlook may not align with the sensibilities of that institution ….. on murky ‘environmental, social or governance’ moralising.”
Chapman Tripp comment
In our view, as written, the Bill would impose a further layer of bureaucracy (record keeping of commercial reasons and their verifications for any market segmentation decisions) rather than meaningful change.
The Bill is also flawed in many technical ways including:
- directors are already under a duty to act in what they believe are the best interests of their company, which, despite the recent expansion of the available considerations to include ESG matters, still would require a commercial rationale for all business decisions
- it has the potential to create a high degree of uncertainty as Courts grapple with when an ESG matter is not a ‘valid and verifiable commercial reason’
- the Bill purports to include ‘wholesale consumers’ within its scope, which is a difficult and confused definition. This risks excluding from the Bill’s protections many of the businesses which the Bill is seeking to defend. Farming and mining, for example, are not a ‘consumer’ activities
- although it is difficult to envisage a scenario where a financial institution would have a valid commercial reason to treat a consumer less favourably due to a prohibited ground of discrimination under the Human Rights Act, the Bill nonetheless appears to create a new exception to these protections
- for want of a ‘valid and verifiable commercial reason’, financial institutions may feel required to provide financial services to consumers, even when they may not offer those services generally or simply choose to target services to a sector (boutique or niche providers to be particularly beware), and
- despite not being mentioned in the General Policy Statement, the Bill covers insurers and non-bank deposit takers.
While Members’ Bills do not have the same security of passage as Government bills, New Zealand First seems likely to go to bat for this one, which means that ACT’s support may be critical if it is to succeed.
