Claire Matthews: Massey University Banking Expert on NZ First's bill to stop banks withdrawing services on an environmental basis

A banking expert believes New Zealand First's move to fine banks for withdrawing services on environmental or social grounds misunderstands the situation. 

MP Andy Foster has introduced a bill to the members' ballot in a bid to ensure banks make withdrawal decisions on a purely commercial basis, with fines of up to half a million.  

Massey University banking expert Claire Matthews told Andrew Dickens the move is not surprising but misses the point of why banks are making these choices.  

She says the banks decisions are based on risk management, which under the introduced legislation would still be possible, meaning it won't make the difference the party's looking for. 

LISTEN ABOVE 

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
New Zealand first want banks to lend to everyone, and
they've introduced a bill to make that happen. Now, the
bill would stop banks and withdrawing their services for any
reason other than a commercial basis. Withdrawal for so called
woke reasons such as environmental or social grounds would make
banks liable of fines of up to half a million dollars.

(00:21):
And this, of course follows concerns that banks won't lend
to fossil fuel companies so that they can achieve a
clean green image. So we have a banking expert with us.
The Associate professor at Massi University Business School is Clare Matthews.
Good morning to you, Claire, Good morning Ellen. What do
you make of it?

Speaker 2 (00:40):
Well, given what's been said by Strange Jones and the
recent pass, it's not surprising that they've chosen to do it,
but I think it's fundamensonally under misunderstands why the banks
are making the decisions that they are. The fundamentally, the
decisions they make are a risk management decision and appear

(01:00):
that under the legislation that they've introduced that would still
be possible. So it's unlikely to make the difference that
they are looking for.

Speaker 1 (01:07):
Indeed, I mean, could the banks believe that damaging the
environment is damaging the economy actually be a valid commercial
reason for withdrawing their services.

Speaker 2 (01:18):
It could they, but it's actually more likely. The pure
risk associated with lending to mining companies and similar companies
is that there is a risk around whether these what
the future of these businesses are, and whether lending to
them is actually a good commercial decision, because there is

(01:40):
a risk that it in the future that there's a
different government that has different rules and therefore all of
a sudden, these organizations become uncommercial and therefore there's a
huge risk to the banks associated with that.

Speaker 1 (01:52):
Yes, well, I mean where do we draw the line
between banks doing what they want and their social license
Because let's be honest, our super funds already they're not
investing in defense companies, So this sort of thing is
already happening.

Speaker 2 (02:05):
Absolutely, and the key we Saber companies are doing that
because that's what the consumers have said they want. They
want to be able to choose key we SAB funds
that are investing in what's described as an ethical way.
So people want to be able to choose their investments
in a way that aligns with their ethical belief The
reality is that we want to be able to do

(02:25):
the same thing with our banks because we want to
bank with a company that is aligned with our ethical
beliefs as well. And as there's a company that is
not lending to fossil fuel companies and that's what we
want to see personally, then that's going to influence who
we choose to bank with. And all of a sudden,
it's removing that choice as the government is not going
to allow banks to not do that.

Speaker 1 (02:46):
Well, wait to see what happens. Claire, thank you for
getting up with it for us. That is Claire Matthews,
the associate professor at the Massive University Business School. For
more from earlier edition with Ryan Bridge, listen live to
News Talks it Be from five em weekdays, or follow
the podcast on iHeartRadio