Lawyers at Chapman Tripp say NZ First’s bill would only require banks to do extra paperwork and wouldn’t make it easier for coal mines to access capital

Law firm Chapman Tripp says the ‘Woke Bank’ Bill proposed by New Zealand First would only add a layer of bureaucracy to financial services, without creating any change. 

A note written by Chapman Tripp's Tim Williams, Emma Peart, and Penny Sheerin said the "clumsily titled” Financial Markets (Conduct of Institutions) Amendment (Duty to Provide Financial Services) Amendment Bill was full of technical flaws. 

“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,” they said. 

NZ First MP Andy Foster proposed the Bill after it was reported BNZ had told a coal mining company it would close all of its accounts by 2030. The proposed law was drawn from the ballot last month and will be debated in Parliament this term. 

The Bill would require financial institutions to offer services to all consumers unless there was a “valid and verifiable commercial reason” for not doing so.

However, the lawyers at Chapman Tripp said the Bill was poorly drafted and would only result in financial institutions having to do extra paperwork.

Directors were already under a duty to act in the best interest of their companies and were required to have a commercial rationale for all business decisions. If the Bill was passed into law, it would then be up to the courts to decide whether ESG (environmental, social and governance) considerations were valid or not. 

Another drafting problem means the Bill seemingly permits a financial institution to treat someone unfairly, in breach of the Human Rights Act, if it had a valid commercial reason.

Insurers & non-bank deposit takers also caught

The law would also apply to insurers and non-bank deposit takers, plus it could also force niche financial service providers—such as a specialist rural lender—to offer its products broadly.

The Chapman Tripp lawyers said members’ bills were less likely to be passed into law than government bills, but NZ First would push hard for this one to be passed. Both the National and Act parties have said they will look at the Bill and consider supporting it.

Vittoria Shortt, chief executive of ASB, told Interest.co.nz that forcing financial institutions to make certain investments could scare foreign investors away from the New Zealand market. 

The Government has made significant reforms to overseas investment rules in an effort to attract more capital to the economy, and it will hold an infrastructure investment summit in Auckland next week.

During the event, Infrastructure Minister Chris Bishop will pitch international investors upcoming projects which they could finance or build. However, he won’t say exactly who will attend this event and what projects they will be offered. 

Meanwhile, Parliament’s banking inquiry is gearing up for another set of hearings with the leaders of New Zealand’s biggest banks. The Finance and Expenditure Committee plans to set a “structured agenda” and drill into specific issues with more forensic questions.