Should banks sit in moral judgement of customers?

Do we want our banks making moral judgement about their customers and refusing to serve those they decide don't measure up?

National Australia Bank-owned Bank of New Zealand, and apparently every other bank in the country, think they do have a right to make such judgements.

When BNZ gave the Gloriavale Christian community three months to find alternative banking arrangements, every other bank in the country turned it and its Christian Church Community Trust away.

As is typical of all banks, the fine print of BNZ's contracts gives it the right to close a customer's account for any reason.

But the High Court has twice ruled that BNZ has to keep open Gloriavale's bank accounts – apparently it and associated businesses have a total of 83 of them, including one held by a midwifery service – until the substantive issue has been decided.

Earlier this month, Justice Helen Cull of the Greymouth High Court ordered the continuation of an injunction against BNZ that was first ordered in November by Justice Rachel Dunningham.

Among the reasons BNZ has cited for wanting to cut ties with Gloriavale, a customer of years standing, was an Employment Court finding in May last year that three former members of the Gloriavale community, who had worked in the community from age six, were employees and not volunteers.

Inconsistent with our policy

BNZ claimed: “It is inconsistent with BNZ's human rights policy to force children to work,” according to its lawyer, Will Irving.

We already have laws against child labour and banks are not law enforcement agents.

Gloriavale's lawyer, Richard Raymond, KC, also embarrassed BNZ by revealing it had been copying and pasting from Wikipedia in an internal report, which listed up to 17 other reasons for closing the community's accounts.

“One can tell from the way it's framed, the spelling mistakes, the commas and so on, that it is taken directly from Wikipedia,” Raymond told the court in May, adding that BNZ had made no attempt to fact-check the allegations or provide Gloriavale with a chance to comment or refute those matters.

Justice Cull's ruling was that there was no obvious detriment to BNZ from keeping the relevant accounts open and cast doubt on BNZ's rights of unilateral power of termination.

“There is a serious question to be tried on at least the breach of contract cause of action and it is appropriate that the Gloriavale accounts remain functional pending final resolution of the claim,” she said.

Asking the right questions

Justice Cull has been asking the right questions, in my opinion. “Isn't this a bank becoming the arbiter of morality? Isn't that unfair?” she asked during a hearing in May.

Let me say that I am an atheist and believe Christian churches and other religions have much to answer for when it comes to matters such as women's rights, marriage equality, and the right to bodily autonomy.

But I also believe strongly in the rights of anybody to believe whatever they wish to believe, so long as they don't harm other people's rights in the process.

I most certainly don't want banks butting in on such matters either.

You could characterise access to a bank account as an essential service, something Justice Cull clearly thinks is the case, and Gloriavale's lawyer Raymond argued that New Zealand is moving in the direction of other jurisdictions where access to banking services has been characterised as a right.

A similar issue blew up in Britain in July when Brexit campaigner Nigel Farage announced that he'd been debanked by no less than a 330-year-old bank Coutts, which is owned by National Westminster Bank, because of his political views.

I'm among those who believe Brexit was a calamitous political and financial mistake and I was appalled by the fearmongering and outright falsehoods people such as Farage indulged in during the Brexit campaign.

But should his bank be sitting in moral judgement of him? Most definitely not, in my view.

A bailed-out bank

Since Nat-West is one of the banks that the British taxpayer bailed out in 2008, the British government still owns 39%, so the Farage debanking became a highly politicised row that led to the sacking, not only of the Coutts chief executive Peter Flavel, but the Nat-West CEO Alison Rose as well.

Britain's government has also introduced new rules requiring banks to explain any decision to close an account and to give the customer 90 days to find a replacement bank, but stopped short of requiring banks to provide banking services.

It emerged that Coutts had a “reputational risk committee,” which had decided that Farage was “seen as xenophobic and racist” and “considered by many to be a disingenuous grifter,” and that therefore Farage's views didn't align with those of Coutts.

Britain's anti-money laundering legislation requires banks to apply heightened scrutiny to anyone deemed to be “a politically exposed person.”

Our Anti-Money Laundering and Countering Financing of Terrorism Act (AMLCFT) contains similar requirements for banks and other institutions to conduct enhanced customer due diligence for “a customer who it has determined is a politically exposed person” (PEP).

But it's a major step from the due diligence and reporting requirements imposed by this Act to debanking customers a bank finds unsavoury.

It does seem that banks are being overly zealous in applying the requirements of such legislation, prying needlessly into personal matters and demanding onerous documentation – even Britain's Chancellor of the Exchequer, Jeremy Hunt, has revealed he was denied a bank account at digital bank Monzo last year because, he believes, he's a PEP.

Back in the limelight

Farage, who had been casting around for an issue to get himself back in the limelight, seized on the issue with glee, alleging Coutts and Nat-West's behaviour was an example of “woke capitalism.”

Back in New Zealand, there is growing disquiet about banks coercing their customers to achieve political goals.

Just this week, Federated Farmers expressed concern about “whether New Zealand banks' participation in sustainability initiatives like the Net-Zero Banking Alliance are reducing competition in agricultural banking.”

The Fed's domestic commerce and competition spokesman Richard McIntyre put out a statement calling for an independent inquiry into rural banking to examine such issues.

Under the net-zero alliance, “banks have collectively agreed lending strategies, including setting 2030 targets for reducing the level of emissions associated with lending,” McIntyre said, naming BNZ as the first bank to set a target here to reduce greenhouse gas emissions from dairy farming by 11% in the next six years.

“This banking alliance raises some very serious questions about whether our banks are acting in a truly competitive manner, or if the joint commitment is effectively banks collaborating on a joint lending strategy,” he said.

“Individual companies are free to put in place whatever requirements they like, but we have a real issue when the main competitors are collectively setting requirements that leave farmers without choices.”

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