The Banking Ombudsman Whistleblower Service: A Masterstroke

The launch, by the New Zealand Banking Ombudsman, of a whistleblower service for bank staff is more than a playground nod to big banking. It is a masterstroke in leadership that speaks to proponents of external reporting lines.

It also rings in with the Serious Fraud Office, the Chief Ombudsman and the Ministry of Justice in suggesting changes to the Protected Disclosures Act 2000 do not go far enough.

Why? Because not only does the Banking Ombudsman signal that the internal speak up processes, as fostered by their member banks, are insufficient, the new banking ombudsman whistleblower service does not require a ‘serious’ or ‘gross’ threshold to be reached.

In both instances the Banking Ombudsman is wise.

External speak up processes garner more use than internal ones and waiting for a serious or gross threshold to be reached enables plenty of bad behaviour along the way. This means early intervention is both prevented and undermined.

Providing a respected, external, confidential and independent speak up line better enables the bad behaviour of colleagues or a bank to be reported. Some banks, such as TSB, have already mastered this point but clearly not all.

Accordingly, in the media release, Banking Ombudsman Nicola Sladden refers to a “safe and independent channel”. These are carefully crafted words that offer a gentle swipe to the alternative of doing it hard – trusting internal measures and processes alone.

The facts in all of this speak for themselves. Craig McFarlane, Director of New Zealand owned and operated Report it Now speaks readily of the dramatic upswing in reporting once an external reporting line is added, or used to replace, internal reporting measures.

“Generally companies will experience an increase in reporting of around 40% when an external option is provided. This will increase further if a speak up culture is actively embedded complete with training in how to achieve this,” says Craig.

The reason is that raising any type of concern, let alone reporting misconduct within an organisation, relies on ethical leadership, an open culture, fair and transparent speak up processes and skilled managers.

Skilled managers are those that exhibit a willingness to listen instead of displaying defensiveness and denial.

Such defensiveness has already been witnessed in New Zealand when the country’s largest banks strenuously denied, in the midst of the Banking Royal Commission  that they were ‘as bad’ as their Australian parents and counterparts.

Unfortunately, their denial continued to ring hollow as evidence of trickery surfaced – the latest being the $280,000 penalty, as sought by the Financial Markets Authority (FMA) and granted by the High Court to ANZ over the misleading sales of credit card repayment insurance (CCRI).

According to the FMA, despite knowing that many customers were ineligible ANZ continued to charge and neglected to cancel their policies. An underhand type of cash cow if you will, but one that eventually, under scrutiny, ran dry.

This scenario alone begs the question – how many ANZ staff knew and why, despite all the internal attention given to speak up, did every single staff member choose to remain silent?

Willful blindness or ethical disengagement? One can only wonder which was at play.

But, clearly, in order to understand unethical or bad behaviour, effective training in what constitutes ethical behaviour would not go astray.

Former BNZ Chair Kerry McDonald once stated that “it is a real warning sign if staff are too scared to engage in a process because they fear retribution.” At the time he was referring to the sacking, by ANZ, of seven staff for deleting customer email addresses to prevent them from giving negative feedback. Fearing retribution never sounded so accurate.

And so, into this type of fray we now have the new and separate arm of the Banking Ombudsman – a whistleblowing service. This must, surely, appear like strawberries and champagne to a bridal party.

But the wedding, between the Banking Ombudmans’ confidential supplementary service and each bank’s internal version, will not necessarily be one made in heaven.

Expect the collegial welcome mat to be out for a while but it is not beyond the bounds of reality to expect the seeds of discontent to become evident.

The Banking Ombudsman whistleblowing service will, to an extent, rely on each bank for effective messaging, reinforcement, and embedding of how their service works.

Previously this reliance has not worked well. In 2006 Consumer magazine (edition 455) reported that only four per cent of survey respondents (11,190 persons) who had problems with their bank were told that they could complain to the Banking Ombudsman.

Reflecting on this dismal statistic, the professionalism with which each bank promotes and embeds a whistleblowing service aimed at their employees, that essentially rivals their own, will need to be exemplary.

A lot will come down to trust.

The questions that many banks could benefit from asking their employees is: if you witnessed or were party to misconduct would you report it? Followed by: if you reported misconduct a) would you trust your manager, or bank at large, to do something about it or b) would you prefer to choose the new Banking Ombudsman whistleblowing service to investigate?

An informed guess would suggest that the Banking Ombudsman already knew, or had a definitive insight, into the answer for both questions.

A smart money wager suggests that the decision to target employees instead of waiting for customer complaints was founded on striking at the heart of the matter.

And it’s a body blow to everyone from each bank’s General Counsel to Risk and Audit or People and Culture – those that thought they had it all – under control.

By seeking to arrest bad behaviour, poorly designed products or systems that fail to root out irregularity the Banking Ombudsman is taking direct aim at lifting the reputation and trust in the sector like no other.

It’s a masterful stroke. One that sides with external reporting, supports confidentiality and gives riddance to thresholds. And like any body blow, its success will come down to the bruising and how it is received along the way.