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Better ways to protect against de-banking than ‘anti-woke’ bill

Most people agree that you shouldn’t be ‘de-banked’ because of your beliefs. Whether a bank should be able to decline a customer because of the industry they’re in is a slightly different question, but one that raises similar concerns – that access to essential financial services could be determined by ideology rather than economics. 

Enter NZ First’s ‘anti-woke’ banking bill, which is now to be considered by Parliament.

De-banking is the withdrawal or refusal of banking or other financial services. Access to these services is essential. Without access to transactional banking at a minimum, and perhaps to other services, such as loans, it would be almost impossible to participate in society. De-banking is therefore an extremely potent way to marginalise disfavoured views and activities. 

Concern about de-banking has been bubbling overseas, with Nigel Farage, Brexiteer and leader of Reform UK, alleging that his political views contributed to his termination by Coutts bank in 2023 (though an independent review found there was no evidence of this). 

Canadian truckers protesting against Covid vaccine mandates in 2022 had their bank accounts frozen by the government, and an English vicar claimed in 2023 that he was de-banked after he queried his bank’s promotion of trans initiatives (the bank says it was because it had a ‘zero-tolerance approach to discrimination’).

Closer to home, BNZ has been fighting for its right to de-bank the Christian Church Community Trust – Gloriavale. After an Employment Court finding that a Gloriavale business had been employing children as young as six, BNZ informed the sect that it would withdraw its services because child labour breached the bank’s internal human rights policy.

Gloriavale couldn’t find a new bank, and asked the High Court to stop BNZ closing its accounts. Although Gloriavale won the first round, BNZ appealed and the Court of Appeal cleared the way for closure of the accounts.

Most recently, there have been stories of banks staging strategic retreats from mining and fossil fuel-adjacent industries, including petrol companies. NZ First took up the cudgels against “climate radicals”, and was joined by a chorus of other politicians, and then met with a PR counter-offensive by the banks who said the move was a sober-minded response to the risks and financial prospects of these sectors and not a manifestation of “wokery”.

Not content with waging a war of words, NZ First MP Andy Foster produced a member’s bill on the matter. Unlike Government bills, these bills can only progress if they are drawn from a ballot – and Foster had the uncanny good fortune to have this happen almost immediately. 

However, also unlike Government bills, members’ bills don’t go through any formal policy development process, and in this case it shows.

The key provisions say that banks and other financial institutions cannot discriminate against a consumer on the basis of “any director indirect environmental, social, or governance consideration”, a “climate reporting standard”, or the consumer’s industry. 

However, they can refuse to provide financial services if they have “a valid and verifiable commercial reason” or if the law otherwise requires or permits this.

There’s a fair amount of devil in this detail. For example, if a bank can’t refuse services for “any … governance consideration”, would they have to bank a company even if they thought its board lacked necessary competence? Perhaps this kind of concern could be massaged into a “commercial reason”, though presumably the bill prohibits decision-making based on “indirect” considerations precisely to avoid that kind of workaround. 

Even so, it would have to be a “valid and verifiable” reason, and these are highly subjective terms, open to a wide range of interpretations.

We also need to be at least a little careful about limiting the freedom of private actors. If banks must service any legal activity that provides a commercial return regardless of “industry”, then they must service brothels, tobacco companies, and gambling as well as petrol stations. It’s hard not to have some sympathy for banks who would rather not go there.

Of course, this sympathy needs to be balanced by recognising that it’s not possible to operate a business, earn a living, or function in society without access to financial services. The power to cancel a customer’s accounts, like any power, is open to misuse.  

However, there are other options that may strike a better balance than the bill. The first was considered by the High Court in the Gloriavale case – a rule that banks cannot terminate a customer’s account “arbitrarily, capriciously or in bad faith, or unreasonably in the sense that no reasonable contracting party could have so acted”. 

This is a more modest proposal than in the NZ First bill – closing an account requires a bank not to act wrongly, rather than to have a “valid and verifiable” reason – but it still has real legal teeth, allowing courts to scrutinise banks’ decisions.

The second option would be some kind of state-provided banking facility. If we don’t want to overburden private businesses but want to ensure that any legal activity can obtain banking services, even controversial ones, it may be fair that the state that legalised the activity also provides the services. 

Lastly, we could follow the lead of the UK, Canada and France and stipulate that banks must provide at least a basic transactional account to anyone who applies, subject only to minimal criteria, for example proof of identity.

Measures like these are justifiable at least because de-banking can be difficult to identify and prove. In the Gloriavale case, the High Court considered whether BNZ wanted to distance itself from the controversial community rather than manage genuine risk. 

By contrast, the Court of Appeal thought BNZ simply made a “considered decision” consistent with its terms and conditions. These allowed termination “for any reason” which, said the court, meant what it said even though these terms were imposed unilaterally and without negotiation.

The Court of Appeal went on to say that a bank’s “legitimate commercial and reputational interest” extends to adopting “an environmental responsibility policy, and to decide not to provide banking services for a major polluter pursuant to that policy, however regular the conduct of that entity’s accounts and however good that banking relationship may have been”.

The spectre of de-banking already looms when unilateral terms allow termination of services to protect a bank’s reputation. Having some kind of consumer protection against this imbalance of power is reasonable.

But the current bill is a clumsy attempt to address the issue, no matter how well it may fit a particular political zeitgeist.

That said, it’s good that we’re having the debate. Access to banking is so important that it should only be withheld for serious and principled reasons. 

Defining those reasons, and better ways to hold banks to account for the use of their power, is where we should focus now.

This article was originally published by Newsroom on 11 March 2025.

Alex Penk
March 21, 2025
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