Banks should be free to refuse customers that they do not wish to bank.
If some clients are too risky to bank because of the inherent riskiness of the sector they're in, it's just a commercial decision. Banks have incentive to get it right, and if they're all getting it wrong and failing to bank a low-risk sector, a new bank could enter or an existing bank could shift to serving that sector - and scoop it all up for itself.
When those choices are under the shadow of the banks' regulators, it's a much more difficult problem.
The RBNZ has very clear preferences over climate policy. Banks could easily have taken a read that they will have a much worse relationship with their regulator if they fail to toe this line and join green banking initiatives.
That means choices among banks might not be because they've each independently come to an assessment of the inherent riskiness of a firm or sector. It might be because they each have concluded that their regulator will punish them for failing to take that view, and that the losses from being punished by the regulator exceed the value of banking the incorrect sector. Competition and entry do not solve that problem.
So I wish that politicians worries about this issue would focus less on yelling at the banks, and more on checking what the banks' regulator is up to.
One glaring error, misrepresentation, or blatant biased comment/observation makes a thoughtful reader dubious about the veracity and/or intent of the entire article particularly if it affects the core premise or purpose of the writing. Journalists and editors that wish to be taken seriously and be “trusted” can’t afford to be sloppy or evangelical.
“Those ideologically supportive of the “free market” are trying to coerce banks to stop ditching customers that don’t meet their environmental, social and governance (ESG) commitments, and/or are deemed too financially risky.”
That's a mixed sentence if ever I saw one: forcing customers to conform to ESG is totally different to declining customers on the basis of financial risk. ESG is ideology; financial risk is essential business. Banks should protect shareholders, savers and other stakeholders from making financially risky loans. Not pander to ideology.
Banks should not use ideology (or theology) against customers. The next might be to refuse to service Christians, Jews or Muslims? Or perhaps ethnicity/race?
“Those ideologically supportive of the “free market” are trying to coerce banks to stop ditching customers that don’t meet their environmental, social and governance (ESG) commitments, and/or are deemed too financially risky.”
That's a mixed sentence if ever I saw one: forcing customers to conform to ESG is totally different to declining customers on the basis of financial risk. ESG is ideology; financial risk is essential business. Banks should protect shareholders, savers and other stakeholders from making financially risky loans. Not pander to ideology.
Banks should not use ideology (or theology) against customers. The next might be to refuse to service Christians, Jews or Muslims? Or perhaps ethnicity/race?
I seem to get sidetracked into media commentary although it is an offshoot of my speciality in communications technologies and the law. If often get an attack of imposter syndrome when I do the media comments on RCR.
At the moment I am going back to my roots and analysing a case involving law and technology.
A post will follow.
Watch this space.
But tomorrow - as they say in Monty Python - something completely different.
You have to wonder why? Surely not ignorance, and what's the advantage of the "spin" . Hitler, Stalin, Mussolini, Franco, Trump, and more were/are authoritarians, but liberals? I wait and look forward to her explanation. Thanks for the article.
But the little "quote" from Einstein proclaiming that insanity is doing the same thing and expecting different results is wrong . He never said any such thing, it's also been attributed to Benjamin Franklin and several others. All wrong. , and its fundamentally wrong in any case. Ie: roll 3 dice, repeat and note the result. High speed atom smashers operate millions of times a second and get different results
This is the Matthew effect, where pithy wisdoms are falsely attributed to relatively famous people!
Banks should be free to refuse customers that they do not wish to bank.
If some clients are too risky to bank because of the inherent riskiness of the sector they're in, it's just a commercial decision. Banks have incentive to get it right, and if they're all getting it wrong and failing to bank a low-risk sector, a new bank could enter or an existing bank could shift to serving that sector - and scoop it all up for itself.
When those choices are under the shadow of the banks' regulators, it's a much more difficult problem.
The RBNZ has very clear preferences over climate policy. Banks could easily have taken a read that they will have a much worse relationship with their regulator if they fail to toe this line and join green banking initiatives.
That means choices among banks might not be because they've each independently come to an assessment of the inherent riskiness of a firm or sector. It might be because they each have concluded that their regulator will punish them for failing to take that view, and that the losses from being punished by the regulator exceed the value of banking the incorrect sector. Competition and entry do not solve that problem.
So I wish that politicians worries about this issue would focus less on yelling at the banks, and more on checking what the banks' regulator is up to.
Thanks for the comment Eric
As an argued article I got the poinjt buit expressed no support or opposition.
I was concerned at the way language had been used to put a negative spin on the issue.
More linguistics than substance
Right on (the button)!
One glaring error, misrepresentation, or blatant biased comment/observation makes a thoughtful reader dubious about the veracity and/or intent of the entire article particularly if it affects the core premise or purpose of the writing. Journalists and editors that wish to be taken seriously and be “trusted” can’t afford to be sloppy or evangelical.
I think your post is spot on David
I quote from the newspaper journalists statement:
“Those ideologically supportive of the “free market” are trying to coerce banks to stop ditching customers that don’t meet their environmental, social and governance (ESG) commitments, and/or are deemed too financially risky.”
That's a mixed sentence if ever I saw one: forcing customers to conform to ESG is totally different to declining customers on the basis of financial risk. ESG is ideology; financial risk is essential business. Banks should protect shareholders, savers and other stakeholders from making financially risky loans. Not pander to ideology.
Banks should not use ideology (or theology) against customers. The next might be to refuse to service Christians, Jews or Muslims? Or perhaps ethnicity/race?
I think your post is spot on David
I quote from the newspaper journalists statement:
“Those ideologically supportive of the “free market” are trying to coerce banks to stop ditching customers that don’t meet their environmental, social and governance (ESG) commitments, and/or are deemed too financially risky.”
That's a mixed sentence if ever I saw one: forcing customers to conform to ESG is totally different to declining customers on the basis of financial risk. ESG is ideology; financial risk is essential business. Banks should protect shareholders, savers and other stakeholders from making financially risky loans. Not pander to ideology.
Banks should not use ideology (or theology) against customers. The next might be to refuse to service Christians, Jews or Muslims? Or perhaps ethnicity/race?
Thanks Peter
As always your comments are much appreciated.
I seem to get sidetracked into media commentary although it is an offshoot of my speciality in communications technologies and the law. If often get an attack of imposter syndrome when I do the media comments on RCR.
At the moment I am going back to my roots and analysing a case involving law and technology.
A post will follow.
Watch this space.
But tomorrow - as they say in Monty Python - something completely different.
You have to wonder why? Surely not ignorance, and what's the advantage of the "spin" . Hitler, Stalin, Mussolini, Franco, Trump, and more were/are authoritarians, but liberals? I wait and look forward to her explanation. Thanks for the article.
But the little "quote" from Einstein proclaiming that insanity is doing the same thing and expecting different results is wrong . He never said any such thing, it's also been attributed to Benjamin Franklin and several others. All wrong. , and its fundamentally wrong in any case. Ie: roll 3 dice, repeat and note the result. High speed atom smashers operate millions of times a second and get different results
This is the Matthew effect, where pithy wisdoms are falsely attributed to relatively famous people!