Today's Top 10 is from interest.co.nz's own Gareth Vaughan.

As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz.

We are keen to find some new Top 10 contributors so if you're interested in contributing, contact gareth.vaughan@interest.co.nz.

See all previous Top 10s here.

1)The decade we almost stopped climate change.

The New York Times has gone to town with this book length article tracing the history of fears human activity is changing earth's climate. It kicks off with the efforts of Friends of the Earth's Rafe Pomerance and geophysicist Gordon MacDonald to spread the word among the US elite in 1979.

To explain what the carbon-dioxide problem meant for the future, MacDonald would begin his presentation by going back more than a century to John Tyndall — an Irish physicist who was an early champion of Charles Darwin’s work and died after being accidentally poisoned by his wife. In 1859, Tyndall found that carbon dioxide absorbed heat and that variations in the composition of the atmosphere could create changes in climate. These findings inspired Svante Arrhenius, a Swedish chemist and future Nobel laureate, to deduce in 1896 that the combustion of coal and petroleum could raise global temperatures. This warming would become noticeable in a few centuries, Arrhenius calculated, or sooner if consumption of fossil fuels continued to increase.

Consumption increased beyond anything the Swedish chemist could have imagined. Four decades later, a British steam engineer named Guy Stewart Callendar discovered that, at the weather stations he observed, the previous five years were the hottest in recorded history. Humankind, he wrote in a paper, had become “able to speed up the processes of Nature.” That was in 1939.

It's quite a tale and also features a young Al Gore, the CIA, various US presidents, big business, and of course, lots of talkfests. As you'd expect, given the subject, there's plenty of depressing reading. Especially some of the epilogue.

More carbon has been released into the atmosphere since the final day of the Noordwijk conference, Nov. 7, 1989, than in the entire history of civilization preceding it. In 1990, humankind burned more than 20 billion metric tons of carbon dioxide. By 2017, the figure had risen to 32.5 billion metric tons, a record. Despite every action taken since the Charney report — the billions of dollars invested in research, the nonbinding treaties, the investments in renewable energy — the only number that counts, the total quantity of global greenhouse gas emitted per year, has continued its inexorable rise.

Like the scientific story, the political story hasn’t changed greatly, except in its particulars. Even some of the nations that pushed hardest for climate policy have failed to honor their own commitments. When it comes to our own nation, which has failed to make any binding commitments whatsoever, the dominant narrative for the last quarter century has concerned the efforts of the fossil-fuel industries to suppress science, confuse public knowledge and bribe politicians.

But some hope for the future is also seen.

Like most human questions, the carbon-dioxide question will come down to fear. At some point, the fears of young people will overwhelm the fears of the old. Some time after that, the young will amass enough power to act. It will be too late to avoid some catastrophes, but perhaps not others. Humankind is nothing if not optimistic, even to the point of blindness. We are also an adaptable species. That will help.

2)How America uses its land.

Bloomberg has put together a fantastic interactive chart showing how Americans use their land. Not surprisingly, it shows urban areas grow by about one million acres a year. This is well worth a look, and I'd love to see the same type of chart for New Zealand.

3) Debt piled on your children and your children’s children.

DC Report's Stan Collender has a short but sweet take on burgeoning US budget deficits. Trillion-dollar-plus deficits every year of the Trump administration and beyond will force US politics and politicians to face challenges they’ve never had to face before, Collender says. He lists five.

1. How will the federal government respond to the next economic downturn? Will Americans, who throughout U.S. history have expressed great anger about Washington’s red ink, decide that a deficit that approaches or exceeds $2 trillion is acceptable? Will policymakers have to limit their response to a downturn to show obeisance to the old limit-or-reduce-the-deficit mantra as they did in 2009 when the Obama stimulus was developed? Does this mean that the next economic downturn will be deeper and last longer than we’ve come to expect?
2. Is the same thing true of future military contingencies? How will the U.S. respond if there’s less tolerance for even higher deficits?
3. What will the need to finance a national debt that’s increasing by $1 trillion or more each year do to interest rates in the United States? How vulnerable will that make the American economy to the big foreign lenders like the Chinese?
4. How will the U.S. be able to respond to the needs of the next generations of Americans such as infrastructure, retirement and healthcare?
5. How will Congress ever agree to another budget if voting for deficits that are less than $1 trillion is politically unpalatable? Are threatened or actual government shutdowns even more likely now than they’ve been recently?

4) India on track to become the world’s third largest economy in the next decade.

ANZ economist Shashank Mendiratta and the bank's head of Asian research Khoon Goh, have issued a useful report on India. It's from an Australian perspective but is certainly relevant to New Zealand too. Ahead of his first trip to India in 2011 then-PM John Key was talking up the potential for a free trade deal. Key visited again shortly before stepping down as PM in 2016, when he and Indian counterpart Narendra Modi issued a joint statement including a commitment to continue to work towards a Free Trade Agreement. But, based on the Ministry of Foreign Affairs & Trade's website, there appears to have been little to no progress since.

India is on track to become the world’s third largest economy in the next 10 years. India currently accounts for 3% of global GDP even as it constitutes nearly 18% of the world’s population. The country is expected to contribute more to global growth in 2018 than the entire euro area. According to the IMF, India’s share in global GDP will increase to more than 4% by 2023. India’s trend growth is nearly 2.8 times the world’s trend growth. Next year, the size of India’s economy is expected to surpass that of France and the United Kingdom, lifting India’s ranking to 5th from 7 th. At the current growth rates, India could overtake Japan and Germany to become the world’s third largest economy within the next decade (Figure 2). 

India will grow above 7% in real terms on a consistent basis. Not only will it grow at a faster rate, but also consistently. Figure 3 below plots the bivariate time series of GDP growth rates and the GDP variance of countries with similar sovereign credit rating as India through 2023, based on IMF projections. India is expected to consistently grow at around 7.5% per annum through to 2023, higher than most of the other key economies in our sample.

5) Concerns about UK reverse mortgages.

New Zealand's Heartland Bank is going gangbusters in the reverse mortgage market here and over the ditch in Australia. And according to the Financial Times the UK reverse mortgage market is growing fast. However, the FT is airing concerns - via Professor Kevin Dowd of Durham University - that insurers may be repeating a common error from the past by failing to price for, and hold sufficient capital against, idiosyncratic and complex financial products.

What has sparked Prof Dowd’s unease is one of the features of these products: the so-called no negative equity guarantee (NNEG). This limits the borrower’s repayment obligation to the lower of the compounded final loan amount or the value of the house - a safeguard against mis-selling. He worries that the insurers might be undervaluing what is in effect a borrower’s put option and overstating their equity as a result.

There are two key ways a lender can lose out on an equity release mortgage. The first is longevity. Because interest rolls up, and thus increases the total amount to be repaid at a compounding rate, the lender is exposed to the risk that the borrower lives much longer than expected. The other potential trap is house prices, should these prove lower than anticipated when the house is sold. These risks rise the more loan-to-value ratios go up.

So how could UK insurers be undervaluing their liabilities? According to Dowd and the FT, they might be computing the put option’s cost imprudently by inputting assumptions about future house price inflation into their models.

This approach has the effect of driving down the apparent cost of the option, suggesting the insurer must only retain a smidgen of capital against it. The prudent method is actually to ignore house price inflation entirely. That’s because what the insurer is in fact doing is agreeing a price today for the house, but only getting possession in future. Logically then, the so-called forward price the option should be priced off is lower than today’s, reflecting the fact that in the interim, it has not been enjoying the benefits (rents from the property, for example).

When the calculation is done this way the difference is startling, the FT says.

Prof Dowd has computed an illustrative case for a 40 per cent loan to value mortgage compounding at 5 per cent. Bolt-in future house price inflation of 4.25 per cent, as he believes at least one firm is doing, then the cost of the NNEG is just 3 per cent of the loan amount. Do it more prudently and the cost rises to a thumping 52 per cent. Apply that to the £10bn-odd of mortgages that have been written in the past few years at rising loan-to-value ratios and you get a potential capital shortfall of billions.

6)Bank robbery: the ‘theft of the century’ and a house in Fishponds.

Given my reporting on curious, dodgy and outright crooked companies registered at strange and surprising NZ addresses, this one piqued my interest. The Bristol Cable reports on chunky international money laundering scandals linked to companies registered at a Bristol address. The location in question is 1 Straits Parade in Fishponds. It's home to a barber shop and next door to a KFC. 

The Cable spoke to the owner of 1 Straits Parade, a Mr Erkan Cil, who runs a barber shop from the premises. He was shocked to learn that companies registered to his property had been used by fraudsters.

“When I bought it [1 Straits Parade], this guy called me from Latvia, and he said ‘I want to receive my letters there’.” Cil then named the caller as Vitalijs Savlovs, a businessman from Latvia.

The Bristol Cable reports that between 2010 and 2014 at least US$20.8 billion was moved by Russian officials and insiders into Europe, the US and other countries, in what became known as the Russian Laundromat. The story shows the extent to which random cities, towns and buildings can be used by organised crime. 

Data from the Organised Crime and Corruption Reporting Project reveals that five of the companies involved in Laundromat transactions were registered to Fishponds. At least $18 million of dirty money was washed through these companies.

7) The 2000 dot com bubble versus tech stocks today.

This tweet, comparing the dot com bubble at the turn of the century which I was covering in London, with the recent on-steroids run of tech stocks is interesting. Who'd have known back then that something would happen within a couple of decades to make that bubble almost look small...

2000 Dot Com Bubble vs 2018 - which is more parabolic for Infotech companies? Coincidence? [hint: the Dot Com Bubble didn't have $15T in global QE, 0% rates for 10 yrs, US nat'l debt $10->$21T]
H/T: Silicon Valley Bank @DiMartinoBooth@neelkashkari@RobSKaplan@RaphaelBosticpic.twitter.com/4y0sutSYsr

— M/I_Investments (@MI_Investments) August 12, 2018

8) Electric cars a job killer?

Bloomberg takes a look at what the rise of electric vehicles and the gradual demise of the combustion engine could mean for workers in Japan who make engine parts, and the regions where they live.

The issue for Japan’s Aichi prefecture, where Toyota and hundreds of suppliers including Kimura’s Asahi Tekko Co. are located, is that electric vehicles use about a third fewer parts than today’s average car. Here’s a sample of what you won’t find in an EV: spark plugs, pistons, camshafts, fuel pumps, injectors, and catalytic converters. For the prefecture’s 310,000 autoworkers, retooling would mean painful downsizing, with far-reaching effects for Japan’s industrial heartland.

“It takes out whole geographical areas,” says Rob Carnell, chief Asia-Pacific economist at ING Bank NV in Singapore. “The hairdressers and the local mom and pop shops, and all of the businesses where the autoworkers would have spent money—they all get hit, too.”

No economist has conducted a formal study of the possible effects of an EV revolution on Aichi. But a recent analysis of Germany’s car industry by the Fraunhofer Institute for Industrial Engineering showed that, if just a quarter of all vehicles were powered by electric motors, the country would lose 9 percent of its auto jobs. And that was after adding all the employment that EVs would create.

9) Easy access to debt & a declining ability to think long-term. 

In an interview with RNZ's Kathryn Ryan, Retirement Commissioner Diane Maxwell spoke about New Zealanders on decent incomes struggling with debt. Commission for Financial Capability research shows 27% of people with household income over $100,000 reporting high interest debt to third-tier lenders, ie, finance companies, hire-purchase companies or payday lenders that may charge interest of 50%. 

Aside from high housing costs, some of this seems to come down to debt-fuelled consumerism, which Maxwell contrasts with the frugality previous generations were prepared to live by.

"What we're seeing very, very clearly is that we are spending more on stuff. We are buying more stuff. Our expectations of what we should have in our kitchen are much higher and credit is quite readily available. So at any given moment if we want something we can borrow and have it. And one of the things we've been looking at is how life has changed and thinking about what our grandparents and parents spent. And we do things like just look at your kitchen and think about what is in your kitchen. And we have coffee makers and sandwich toasters and normal toasters, we have knife racks, we have multiple chopping boards for different purposes, we have a variety of peelers, we have coffee grinders, we have sets of frying pans that have six different pans for different things. We have many, many things that our grandparents just never bought. They will have had a pan and a good knife and a good board."

"We tend to be running two cars, we tend to have two to three flat screen TVs, we have an expectation of an ensuite in the bedroom,...we tend to think we're going to have an international holiday at least once a year, and we have very demanding children. Our children convince us that they need stuff and our children unfortunately increasingly have iPhones and iPads and $120 pairs of shoes. Our children are quite an influence when it comes to what we should be buying."

Maxwell links the easy availability of debt to people losing the ability to think long-term.

"I think there's a group that have been hit hard by housing costs, increased petrol costs particularly in Auckland, and a couple of other things. But even if you take that group out, there's still a sizeable group who aren't being hit by those but are spending more."

"The availability of credit is huge in this conversation. I talked to people in my grandparent's generation who would talk about buying their first home and some of them, for the first year, they sat on packing cases. For the first year your house was pretty sparse because you had just got into your own home and you didn't have a lot. People didn't have a fridge for one to two years, they didn't have a car. They caught the bus everywhere, or maybe as a family they managed one car. And that was normal, that was seen as very typical. If you buy a new house today you can go into a place and look at a couch and get interest free credit and go home with the couch. You can equip your house with everything you need today. So our ability to forgo those things for a period of time, our ability to say 'we're going to save and then spend,' is greatly reduced. And one of the things I say is the irony is we're living so much longer, we're around for so much longer, but our ability to think long-term appears to be decreasing." 

10) As we fret about weak business confidence in New Zealand, this Chris Slane cartoon puts it in a broader context.

11) (A late and sad addition). RIP Aretha Franklin.

Westpac has cut its five-year fixed-term mortgage "special" rate to a market leading 4.99%. However, at the same time Westpac has cut a series of term deposit rates.

Effective Friday, Westpac has shaved 60 basis points off its five year "special" mortgage rate dropping it to 4.99% The next best advertised five-year rate from a bank is the HSBC "premier" 5.29%. Borrowers taking up Westpac's special require a loan-to-value ratio of less than 80%.

Westpac has also sliced 60 basis points of its standard five-year mortgage rate, dropping it to 5.49%.

Whilst there's good news for borrowers, the news from Westpac for savers is bad. The bank has cut a series of savings rates by up to 45 basis points. Full details of the reductions are in the table below.

Westpac term deposit, term PIE & MDS rate table

All carded, or advertised, term deposit rates for all financial institutions for terms of less than one year are here, and for terms of one-to-five years are here.

Term PIE rates are here.

See all banks' carded, or advertised, home loan interest rates here.

And here is the full snapshot of the fixed-term mortgage rates on offer from the key retail banks.

below 80% LVR	6 mths	1 yr	18 mth	2 yrs	3 yrs	4 yrs	5 yrs
as at July 9, 2018	%	%	%	%	%	%	%
	4.99	4.29	5.15	4.49	4.85	5.85	5.99
	4.95	4.29	4.39	4.49	4.79	4.95	5.59
	5.35	4.29	5.05	4.49	4.85	5.89	6.09
	4.99	4.19		4.39	4.85	5.19	5.39
	5.25	4.29	5.15	4.49	4.85	5.89	4.99
	4.80	4.24	4.45	4.49	4.85	5.39	5.59
	4.85	3.99	3.99	4.19	4.69	4.99	5.29
	4.99	4.19	4.49	4.49	4.85	5.39	5.55
	4.85	4.24	4.35	4.49	4.85	5.55	5.69

In addition to the above table, BNZ has a fixed seven year rate which is 6.15%.

And TSB still has a 10-year fixed rate of 6.20%.

Kiwibank is cutting 20 basis points from its one-year "special" mortgage rate, dropping it to 3.99% from Monday.

That makes it the equal lowest one-year advertised rate from a bank, alongside HSBC's "premier" offer.

Kiwibank's special requires a minimum of 20% equity. The bank's standard one-year rate is 4.49%. Kiwibank's specials are available for Welcome Home Loan customers.

The state owned bank's rate cut follows one earlier on Friday from Westpac, which trimmed 60 basis points off its five-year "special" rate dropping it to a market leading 4.99%.

The trading banks' mortgage rate cuts come after the Reserve Bank last week indicated the Official Cash Rate won't be moved from its record low of 1.75% until 2020. Following this announcement wholesale swap rates tumbled. The latest Real Estate Institute of New Zealand monthly sales figures out on Wednesday showed a soft Auckland housing market with the median price of $835,000 below where it was two years ago, and the median days it takes to sell rising.

See all banks' carded, or advertised, home loan interest rates here.

*This article was published in our email for paying subscribers early on Tuesday morning. See here for more details and how to subscribe. 

*This article was published in our email for paying subscribers early on Wednesday morning. See here for more details and how to subscribe. 

By Gareth Vaughan

If your wallet got stolen one of the first things you'd probably do would be cancel any credit cards in the wallet. One thing you may not expect is that the loss of your wallet could lead to the thief being able to obtain a new credit card in your name.

Interest.co.nz has, however, heard about exactly this happening. A victim brought to interest.co.nz's attention had his wallet stolen and subsequently discovered a fraudster had managed to get a Q Mastercard issued in his name. The case is now being investigated by the Police and it's not yet clear how many other victims there may be.

The only identification required for an online Q Mastercard application is a current New Zealand driver's licence. Q Mastercards are issued by FlexiGroup New Zealand, part of Australian financial services company FlexiGroup which acquired Fisher & Paykel Finance in 2016. Banks such as ANZ and Kiwibank require new credit card customers to take proof of their identity and address into a branch.

An associate of the victim, who drew the identity theft to interest.co.nz's attention, says it's "absolutely astonishing" that a credit card can be issued with no confirmation of identity apart from a driver's licence number.

"The trading banks require ID confirmation in person. But theoretically I could rifle through wallets, copy down the numbers of people's licences, and get as many Q Mastercards as I wish," the victim's associate says.

'This is not impossible, but it isn't common'

A FlexiGroup spokeswoman says in a situation like this, where a perpetrator obtains someone's driver's licence details, they would also need to know where the person lived and collect the mail from that address.

"This is not impossible, but it isn't common," the FlexiGroup spokeswoman says.

Having your address printed on your driver's licence is optional, meaning many of us have our addresses on our licence. The FlexiGroup spokeswoman acknowledges this but says this fraud case requires a "high level of pre-meditation" and regular checks of the mailbox at the victim's house. She says the perpetrator has been intercepted by police, and FlexiGroup customers out of money due to fraud get their money back as they're not held liable for transactions they're not aware of.

On top of a series of fees, Q Mastercard customers face a standard interest rate of 25.99% per annum, and a cash advance rate of 27.25% per annum.

Asked whether FlexiGroup has any plans to make the process of obtaining a Q Mastercard tougher, the FlexiGroup spokeswoman says the company is confident its application process supported by a fraud team is appropriate.

"In the past 12 months there were less than 0.03% successful fraudulent applications due to someone using another person's identity across our entire card portfolio," she says.

FlexiGroup is also the issuer of the Flight Centre Mastercard and Farmers Finance Card.

"The case mentioned is part of an active investigation which we are cooperating fully with the Police on. We are therefore unable to comment on the specifics of that case," the FlexiGroup spokeswoman adds.

"We can, however, share that the team at Q Mastercard take fraud very seriously. We acknowledge the impact it has on our customers, the trust they have in our products, and the way they feel about our brand. Alongside verification of ID, there are additional checks in place including validation of physical address where approved applications will have the credit card mailed to."

"FlexiGroup New Zealand understands the impact fraud can have on customers and our fraud team works hard to support customers through what can be a very stressful experience," the FlexiGroup spokesman says.

Meanwhile, the ASX-listed FlexiGroup reported June year financial results on Tuesday. For its NZ cards business active customer numbers increased 18% to 481,000, receivables grew 9% to $707 million, consumer spending rose 14% to $710 million, and cash net profit after tax rose 9% to $31.9 million.

The application criteria for a Q Mastercard is shown below.

*This article was first published in our email for paying subscribers early on Wednesday morning. See here for more details and how to subscribe. 

Kiwibank's annual profit has bounced back after last year's was smashed by the impairment of its written-off core banking upgrade CoreMod.

The state owned bank's June year net profit after tax more than doubled to $115 million from just $53 million the previous year. However, this year's profit is still below 2016's, which came in at $124 million.

Kiwibank's total operating income rose $99 million, or 20%, to $539 million, and its operating expenses climbed $34 million, or 10%, to $373 million.

Net interest income gained $43 million, or 12%, to $411 million, and gross fees and other income rose $10 million, or 5%, to $211 million. The bank's loan impairment losses came in at $1 million versus write backs of $6 million last year. The June year included an $11 million pre-tax CoreMod impairment on top of the previous year's $90 million. 

Lending increased 2.7% to $18.304 billion, and customer deposits - which contribute 87% of total funding - rose 1.2% to $16.173 billion.

Kiwibank's net interest margin, the difference between the interest income generated from lending and the amount of interest paid out to lenders such as depositors, rose 14 basis points to 2.06%. The bank's cost to income ratio was unchanged at 69%, and its return on equity dropped to 7.9% from 10.1%. No dividend was paid versus $5 million last year.

Shareholder disharmony over 'a historical issue'

Meanwhile, Stuff is reporting that disharmony between Kiwibank's shareholders is bubbling into the public eye with The Guardians of NZ Super and ACC filing a notice of claim with NZ Post alleging NZ Post breached its obligations by failing to make available information that would have disclosed risks with the CoreMod project.

 NZ Post sold a combined 47% stake in Kiwibank to the New Zealand Superannuation Fund and Accident Compensation Fund in 2016.

A NZ Super Fund spokeswoman told interest.co.nz that no court proceedings have been lodged and none are imminent.

"This is a historical issue - it in no way impacts the bank and its go forward strategy, which we support. The shareholders are very happy with their investment in Kiwibank, and are committed to the bank and its future. There is good alignment between the three shareholders on business strategy. The potential warranty claim relates to matters that occurred prior to settlement in October 2016, and is between shareholders only. Kiwibank itself is not involved. We (NZSF, ACC and NZ Post) are working to resolve the matter and are currently in discussions. For that reason, further comment will be limited," the NZ Super Fund spokeswoman said.

Former ASB executive Steve Jurkovich took the reins as Kiwibank CEO last month.

Jurkovich said Kiwibank's net interest income rose largely because of "the cost of borrowing money improving." He said increased operating expenses reflected the final impact of closing the CoreMod project, investment in Kiwibank’s strategy, and increased investment in the retail network including new standalone Kiwibank branches.

“From a customer perspective we have remained competitive in the lending market. A key area for Kiwibank is first home buyers and that is why we recently announced we will pre-approve loans requiring only a 10% deposit of the value of a KiwiBuild home for qualifying customers, and contribute $2,000 to moving or legal expenses," Jurkovich said.

“Following changes to internet banking and our app, we’ve seen a huge increase in customers re-fixing their mortgages online, up 86% on the previous year. Customers are seeing more capability to manage their own affairs with upwards of 90% of total bank transactions now digital. There is no standing still when it comes to technology. Kiwibank continues to invest in new capabilities and offerings to stay relevant and meet customers’ expectations," Jurkovich added.

Kiwi Group Holdings, the parent of Kiwibank plus sister companies Kiwi Wealth, New Zealand Home Loans and Kiwi Insurance, posted annual net profit after tax of $122 million up from $58 million last year. At the end of June Kiwi Wealth had $5.5 billion of customer funds under management, which was a 19% increase. Kiwi Wealth has pushed past 200,000 KiwiSaver accounts. Kiwi Insurance paid out about $5.6 million across its four life and disability insurance products as its operating income rose 14% and the value of active policies increased 18% to $18.4 million.

"Profitability and rates of return provides momentum into the next financial year," Jurkovich says.

'I've come into something that looks in pretty good shape'

Jurkovich told interest.co.nz it was "nice" that the June year results close the door on CoreMod enabling Kiwibank to move forward.

"The performance overall around the margin management and the funding side of things, I think the team should be really pleased with that. Growth on the savings side of the business has been solid, the first half on the asset side was pretty appropriately cautious given we had the discussion [with the Reserve Bank] about the eligibility of the capital instruments, so I think the team did a good job massaging the business through that," Jurkovich says.

"The second half on the asset growth was a good pick up but still underperforms our expectations, that's fair to say. The wealth business across the group of companies is probably the stellar result. Ian [Burns] and the team have done a great job there, [with a] mixture of underlying growth, new customers, new technology, and a really good culture around what they're doing there. Insurance business is still reasonably small for us but is growing nicely. So overall I'd say a solid set of numbers sets us up well."

"Big messages I got at the board [meeting] this week were 'we don't want a dividend so reinvest in the business and get growing and get working on the new plan.' Likewise with the capital instruments they remain committed. There's no discussion about wanting to do anything different," says Jurkovich.

"I'm really lucky around my timing. I've come into something that looks in pretty good shape."

Here's Kiwibank's press release and here's a results presentation.

By Gareth Vaughan

The victim of identity theft interest.co.nz wrote about on Tuesday, who had his driver's licence pinched and discovered this enabled the thief to obtain a Q Mastercard issued in his name, also had a second credit card issued in his name following the theft.

This one was a GEM Visa, which are issued by Latitude Financial Services.

"Gem also issued a card with just a drivers license number, plus valid email and phone number. So easy to acquire, and the [$2,000] account was maxed out before the physical card arrived in the mail!. The crim was obviously going through our letter box," the victim's associate, who contacted interest.co.nz, says. "The processes followed by these high interest lenders are far more lax than a trading bank."

As reported on Tuesday, the victim's wallet, which included his driver's licence, was stolen. This was used as identification by the alleged fraudster, and also provided the victim's address. The online application for a GEM Visa asks for a driver's licence, New Zealand or other country's passport, NZ firearms licence or other certified documents as ID.

"As you’d appreciate, due to privacy reasons, Latitude Financial Services cannot comment on a particular customer's experience," a Latitude spokeswoman says.

Latitude Financial Services was created through the purchase of GE Money by investment firm Värde Partners, private equity group KKR, and Deutsche Bank from US conglomerate General Electric in an A$8.2 billion 2015 deal.

The spokeswoman says Latitude, like all credit providers, must comply with a "high regulatory standard" of customer identity verification. 

"Some providers, who do not have a branch network, may adopt a predominately electronic approach to identity verification versus, for example, a bank who may offer a face to face as well as an electronic verification process," the spokeswoman says.

Banks require new credit card customers to take proof of their identity and address into a branch.

The Latitude spokeswoman says identification theft via the postal system is a problem for all credit card providers. She says it isn't related to product features.

"Providers can take steps to reduce the risk such as the use of unmarked envelopes etc, but occasionally such fraud does occur and it can be very difficult to completely eradicate from a practicable perspective."

"In response to your questions, whilst we are not currently expecting to make any immediate changes to our identity verification process, we are always working to keep our customers safe and where we see further measures can be taken we will look to implement them. Such reviews may include consideration of new technologies which are being developed for use in this area," the Latitude spokeswoman says.

"We use a number of different methods to verify an individuals’ identity including electronically checking an applicants identity against multiple external databases or alternatively, a face to face verification arrangement we have with NZ Post. We also have incorporated technology to pinpoint the origin of the application and a market-leading system to identify suspicious applications."

"We take our customers security very seriously and we have a team of trained investigators who work these suspicious applications to verify the identity of the applicant through a variety of methods," she says.

Where identity theft occurs Latitude works both with victims and, where appropriate, law enforcement, the Latitude spokeswoman adds.

"We also encourage customers to contact us as soon as possible if they are concerned or suspect any fraudulent activity. We also encourage individuals who suspect that an application for a Gem Visa was conducted in their names as a result of identity theft to contact us, so we can commence with the appropriate remediation activities. Our levels of fraud instances are low, and would be in line with others in the industry."

"Unfortunately identify theft does happen, but there are ways to protect yourself and there are a number of governmental websites that provide information on this. We encourage readers to read this [Department of Internal Affairs] link, which provides useful and simple tips to avoid this happening," the Latitude spokeswoman says.

The Gem Visa has an establishment fee plus a series of account, transaction and interchange fees. The card comes with some 0% interest deals including for six months on purchases valued over $250. However, the standard interest rate is 25.99% per annum. (Interest rate and fee details are here).

The spokeswoman says Latitude doesn't think there's any correlation between the interest rates charged and the level of fraud for a particular product.

"Regarding the implication that Gem is a ‘high interest’ lender. We acknowledge that this assertion hasn’t come from yourself, but we feel it is important to point out that the Gem Visa card provides 0% interest for 6 months on everyday Gem Visa purchases over $250 and 0% for up to 55 days on Visa purchases under $250 and long-term interest free plans at some of NZ’s largest retailers. We find a significant portion of our customers use the card smartly to this effect."

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By Gareth Vaughan

"It is time to retool our economy to make it work within the limits of our environment, shape it to deliver on the hopes and aspirations of all our people, and for our economic purpose to be bigger than just profit."

So said Prime Minister Jacinda Ardern in a speech to an Auckland business audience on Tuesday morning.

Ardern's speech was entitled Working together to build a new economy. The lofty goals she outlined are similar to those detailed in a paper I was sent later on Tuesday. Entitled Governance of economic transition, the paper paints a dystopian picture of where the world is heading arguing the ways energy, transport, food and housing are produced and consumed must be transformed via some sort of global Marshall Plan.

The paper was written by Finland's BIOS Research Unit. It's a scientific background document on transforming economies to support work on the United Nations Global Sustainable Development Report 2019.

The paper argues new economic thinking is required for a changing world that's facing challenges from climate change and a move away from fossil fuel driven energy supply.

"In addition to rapid climate change, biodiversity loss, and other environmental hazards, societies are witnessing rising inequality, rising unemployment, slow economic growth, rising debt levels, and governments without workable tools for managing their economies. Central banks in the US and the Eurozone have resorted to unconventional measures such as negative interest rates and buying up significant amounts of public debt. This has relieved some economic pressure, but many commentators are worried about what can be done after these extraordinary measures are exhausted and the next economic crisis hits," the paper says.

"It can be safely said that no widely applicable economic models have been developed specifically for the upcoming era. Here we highlight underutilized tenets of existing economic-theoretical thinking that can assist governments in channelling economies toward activity that causes a radically lighter burden on natural ecosystems and simultaneously ensures more equal opportunities for good human life. Our focus is on the transition period, the next few decades."

'An era of turmoil & profound change'

The paper begins by saying the era of cheap energy is ending. This means for the first time in human history economies are moving to energy sources that are less energy efficient. Production of usable energy will require more, rather than less, effort to power human activity. At the same time sink costs are rising with economies having used up the capacity of ecosystems to handle the waste generated by energy and material use. Climate change is named as the most pronounced sink cost.

"What will happen during the oncoming years and decades when we enter the era of energy transition, combined with emission cuts, and start to witness more severe effects of climate change? This is the big question."

The paper notes that whilst economists highlight carbon pricing as a policy tool for tackling climate change, scientists and environmental research groups push for more profound political engagement and proactive governance of economic transition. This means something akin to a global Marshall Plan.

Living in the past

The paper goes on to argue that today's key economic theories, approaches and models were developed during an era of "energetic and material abundance." These theories were only challenged temporarily during the oil crises of the 1970s and 1990s, with no significant theoretical or political changes made.

"Thus, dominant economic theories as well as policy-related economic modelling rely on the presupposition of continued energetic and material growth. The theories and models anticipate only incremental changes in the existing economic order. Hence, they are inadequate for explaining the current turmoil."

Economies need to transform the ways energy, transport, food and housing are both produced and consumed. The aim of doing this should be creating production and consumption that provides decent opportunities for a good life while reducing the burden on natural ecosystems, the paper argues.

On energy the entire infrastructure must be transformed with the energy return on investment decreasing across the spectrum.

"Unconventional oils, nuclear and renewables return less energy in generation than conventional oils, whose production has peaked, and societies need to abandon fossil fuels because of their impact on the climate."

Furthermore the paper argues that because renewables have a lower return on investment and different technical requirements such as a need to build energy storage facilities, meeting current or growing levels of energy needs with low-carbon solutions will be difficult, or even impossible.

"Thus, there is considerable pressure to lower total energy use. The development of energy production will also need to be closely linked with the development of the systems and practices of energy consumption, for example, the electrification and sharing of transport vehicles."

"In cities, walking and cycling should be emphasized and the remaining public or semi-public transport in and between cities should be largely electrified. This will require changes in city planning for example, how homes and workplaces are connected to each other and how convenient biking is, in vehicle production, in transport infrastructure such as railways, roads and charging stations, and in energy production and storage," the paper says.

"In addition international freight transport and aviation cannot continue to grow at current rates, because of the need to cut emissions and the lack of low-carbon alternatives to current technologies."

'International food trade should return to being a key part of food security rather than serving as a commodity market'

In terms of food the paper points out both wealthy and poor countries face major environmental challenges with food production. It argues countries need to reach a high level of food self-sufficiency, with international food trade returning to being a key part of food security rather than serving as a commodity market.

"With regard to both production and consumption practices, dairy and meat should make way for largely plant-based diets."

On housing, the paper argues the construction sector needs to move away from concrete and steel, given their energy intensive nature and significant contributions to climate emissions and other types of waste.

"Long-lasting wood buildings, on the contrary, can provide carbon storage. A significant shift towards using wood in construction would require changes in the entire production network, starting from forestry, in which construction uses compete for example with paper and energy uses. In addition to manufacturing, cooling and heating are the most significant drivers of lifetime emissions from housing."

'State guided transition to sustainability'

The paper goes on to argue that strong political governance is needed to accomplish these key transitions because market-based action won't suffice.

"There must be a comprehensive vision and closely coordinated plans."

Whilst some politicians and economists seek global carbon pricing, this would be unlikely to guide economic activity in the right direction quickly and broadly in the areas of energy, transport, food and housing, the paper argues. This is because as a policy tool carbon pricing lacks the crucial element of coordinating a diverse group of economic actors towards a common goal.

Another challenge perceived for state guided transition to sustainability is the target of a balanced budget.

"This means, on the one hand, that states should avoid spending to avoid running budget deficits, and on the other hand, that they should avoid regulation that negatively affects existing private enterprise and consequently tax revenues. Thus, states have not been keen to invest in sustainability transformation or limit resource-intensive economic activity," the paper says.

The Chinese example

Rather than looking at the world through a "neoclassical school" lens, the paper offers the alternative of a "post-Keynesian school" lens. It argues here that markets don't lead to socially and ecologically desirable outcomes on their own, needing active political guidance. From this perspective collective action, at least partly organised through the state, should be guided by "social goals and material boundary conditions" rather than by the need to secure public funds.

"Developments in China serve as a reminder that economic theories other than neoclassical ones are already effective in the world. In China, economic transitions have not been held back by the ideas of minimum state intervention or a balanced budget. Past transitions have, however, been ecologically unsustainable in many ways. Beyond Post-Keynesian theory, there can be a variety of economic theories that support rapid materially and ecologically beneficial transitions. The key theoretical requirement is that they must enable politics to acknowledge transformational social goals and the material boundaries of economic activity."

The authors acknowledge that it's difficult to predict the overall outcome from massive changes they're advocating for. 

"But generally the direction would be toward 'a Keynesian world with planetary boundaries': unique, autonomous economies and societies engaging in regulated international trade for specific reasons, such as food security, rather than for the sake of free trade as a principle. Individuals, organizations, and nations would approach the economy as a tool to enable a good life rather than as an end in itself."

"Economic activity will gain meaning not by achieving economic growth but by rebuilding infrastructure and practices toward a post-fossil fuel world with a radically smaller burden on natural ecosystems. In rich countries, citizens would have less purchasing power than now, but it would be distributed more equally. Citizens in all countries would have access to meaningful jobs and they could trust that a desirable future is being constructed on the collective level," the paper says.

'Only states can do it'

The authors acknowledge proactive state-led economic governance oriented toward self-sustained, low emission production and consumption runs contrary to the existing dominant world political order organized around international free trade. Thus key international institutions, such as the International Monetary Fund, would have to be reconfigured.

"Climate change and other environmental changes threaten livelihoods across the planet and thus give cause for mass migration. It is in the interest of all countries to maintain local opportunities for a good life. Because different countries and areas have different path-dependencies and goals, there is no socio-technical solution that fits all."

"One especially important constraint for rich countries is that dramatic reductions in emissions at current high levels of consumption are very challenging, if not impossible. Some developing countries, in contrast, can make significant improvements in their people’s wellbeing with new investments in low-carbon solutions. These developing countries do not need to begin by dismantling the fossil-fuelled infrastructure that has provided a range of low-cost production and consumption opportunities in rich countries for decades. Shifting climate zones towards the Earth’s North and South Poles ads another imperative for learning: for example, food producers in northern Europe have a lot to learn from their southern colleagues," the paper says.

"In view of the challenges encountered today in implementing meaningful international agreements, the most likely option for initiating transitions to sustainability would be for a group of progressive states to take the lead. This would require economic thinking that enables large public investment programs on the one hand and strong regulation and environmental caps on the other. In the modern global economy, states are the only actors that have the legitimacy and capacity to fund and organize large-scale transitions."

By including Ardern's quote at the top of this article I'm not suggesting her government plans to follow the path outlined by the BIOS Research Unit. But if its wish for "a group of progressive states to take the lead" came to fruition, where might New Zealand stand?

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By Gareth Vaughan

For most people who are striving to buy a home one of the first questions they need answered is how much they can borrow.

To help these wannabe borrowers/buyers banks have home loan borrowing calculators on their websites. But are these a useful tool for borrowers or just a marketing tool for the banks?

I conducted a little experiment with the home loan borrowing calculators of ANZ, ASB, BNZ, Kiwibank and Westpac this week. The first thing that struck me was how different they are in terms of the detail of information they ask for.

I plugged in basic information to see how much each bank would be prepared to lend. My fictional borrowers were a couple with no dependents with a combined annual income of $140,000 before tax, monthly expenses of $3,600 and a credit card limit, where asked, of $10,000. Where asked, I said the couple had an $80,000 deposit. According to ASB's calculator, the fictional couple has income of $8,930 a month after tax.

ANZ's minimalist calculatorasks only if it's an individual or joint application, what the annual household income before tax is, how many dependent children there are, and how many vehicles you have.

"We estimate you could borrow up to $866,000 based on the information you provided. Your repayments would be about $5,076 per month over a 30 year loan term (including principal and interest), with the same interest rate of 5.79% p.a. over the 30 year term and a 20% deposit of $217,000," ANZ said.

That means the couple would be paying the equivalent of 57% of their monthly income in mortgage payments. However, the ANZ calculation assumes they can access a $217,000 deposit. ANZ's calculator didn't ask for deposit details.

ASB's calculator, which seeks significantly more detail but asks nothing about a deposit, said; "You may be able to borrow up to $682,000 [with] monthly repayments [on a 30 year loan] based on our current housing variable (floating) interest rate of 5.80% p.a."

That's $4,002, or 45%, of monthly income going on mortgage payments. The ASB calculation includes 3% KiwiSaver contributions.

BNZ's detailed calculatoralso gives a detailed response. Over 20 years $597,268 with fortnightly repayments of $1,737 could be borrowed, over 25 years $647,917 with fortnightly repayments of $1,655, and $682,058 over 30 years with $1,588 fortnightly repayments. The repayment interest rate used is 4.49%, being the bank's two-year classic home loan rate. This is more useful than the floating rates used in the calculations by some of the other banks, given the vast majority of New Zealand borrowers fix their mortgage rates with two years the most popular term.

Kiwibank's calculator says my fictional couple could borrow up to $320,000. Given the $80,000 deposit, this means the couple could afford a home worth $400,000.

Westpac's calculator alsoestimates the couple could afford a property worth up to $400,000, giving them repayments of $1,619 per month. This number crunching also included the $80,000 deposit.

'Originally developed as a marketing tool'

I asked the five banks some questions about their home loan borrowing calculators including what they view the purpose of the calculator as, do they view it as responsible, and if it's wrong or inaccurate, what's the point of the calculator?

Here's what an ANZ spokeswoman said;

"ANZ’s online home lending calculators are designed to provide high level estimates for customers based on them entering some simple variables. Its aim is to give customers a general idea of what they could possibly afford. Our formal assessments of how much a customer can afford and service takes into consideration a greater level of detail. We regularly review our online calculators to ensure they remain useful tools for our customers."

A Kiwibank spokeswoman said;

"Kiwibank’s mortgage calculator is a popular online tool with customers. It was originally developed as a marketing tool but has become a useful starting point for anyone beginning the journey of home-ownership. In line with our commitment to responsible lending Kiwibank has always been relatively conservative in its estimations, and our calculator is built on the premise of a 20% deposit. If a customer has a full assessment we would possibly be able to lend more and could be flexible in regards to the deposit amount. We always welcome feedback in regards to what is useful for customers."

A Westpac spokesman said;

"Our calculator provides customers with a general idea of how much they might be able to borrow. We believe it’s a useful tool for customers starting out on their home ownership journey. As noted on the webpage, the calculator is intended as a guide only and calculated figures are based on the accuracy of the information entered."

An ASB spokeswoman said;

"ASB makes available three home loan calculators on its website. Our mortgage repayment calculator provides an estimate of likely repayments on a home loan of an amount, term and interest rate specified by the user. Our home loan borrowing calculator provides the user an estimate of the amount they could afford to borrow based on income, expenses and repayment term specified by the user. Finally, our property investor calculator provides an estimate of the costs and returns from residential property investment based on amounts, terms and rental returns specified by the user."

"In respect of both the mortgage repayment and borrowing calculators, they are designed to estimate the repayments and affordability of lending based on inputs provided by the user. Minimum deposit requirements vary according to the type of property, whether owner occupied or otherwise, and other market factors. As such, given their indicative nature, the calculators provide ways in which customers can contact us to discuss their individual requirements."

BNZ is yet to respond to requests for comment.

John Bolton of mortgage broker Squirrel Mortgages has experienced some frustrations with banks' mortgage calculators. Bolton said these calculators are only useful when they are kept up-to-date. 

"Whereas credit policy is constantly changing, calculators tend to be marketing projects and quickly forgotten about. The challenge is when a client can only borrow $650,000 and they retort the bank calculator told them $900,000. Of course it can also go the other way. It’s always going to be a fine balancing act and nothing beats good financial advice," said Bolton.

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Rabobank has confirmed what interest.co.nz reported last month, that the Reserve Bank has requested an independent report into the rural lender's governance and management.

Confirmation comes in the general disclosure statement issued on Friday by Coöperatieve Rabobank U.A. – New Zealand Banking Group.

"The Registered Bank is the parent company of the global Rabobank co-operative group, with operations in 38 countries, including New Zealand and Australia. The Rabobank New Zealand Banking Group has a network of 32 offices in New Zealand and employs over 300 people. Two of Rabobank New Zealand Limited’s independent directors and the Banking Group’s CEO are resident in New Zealand," the disclosure statement says.

"The Banking Group has an outsourcing arrangement in place that governs certain operational services provided by its Australian affiliate. Having regard to the Banking Group’s regional and global links and at the request of the Reserve Bank of New Zealand, Rabobank New Zealand Limited has commissioned an independent report to consider aspects of its governance and management frameworks and their operation, the extent of their independence from the Overseas Banking Group and their consistency with the current expectations of the Reserve Bank of New Zealand."

When interest.co.nz asked about this last month both Rabobank and the Reserve Bank declined to confirm or deny the independent review.

The Rabobank group operates on a regional basis in Australia and New Zealand, effectively as one organisation. The NZ bank's eight member board, chaired by Henry van der Heyden, is comprised of the same eight people who sit on the board of sister bank, Rabobank Australia Ltd.

Interest.co.nz has been told key decisions are made by an Australian executive team featuring just one Rabobank NZ employee being the local chief executive, who effectively reports to the regional CEO in Australia. Rabobank NZ pays Rabobank Australia an annual management fee, which was $32 million last year, for services including the use of its sister bank's computer systems. Rabobank NZ is understood to have just one IT person on the ground in NZ who provides desktop support.

Three years ago Rabobank told the Reserve Bank it would be the most adversely affected bank by proposed changes to the regulator's outsourcing policy, and China is the only jurisdiction, aside from New Zealand, where the Rabobank group operates that requires banks to maintain data separately within that jurisdiction.

Asked who is doing the independent report and when it's likely to be completed, a Rabobank NZ spokesman said; "The bank does not have anything further to add to what has been published in our general disclosure statement."

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By Gareth Vaughan

Unlicensed forex and derivatives trader Fullerton Markets Ltd is gone from New Zealand's Financial Service Providers' Register (FSPR) and heading for the Caribbean.

The controversial company that received a formal anti-money laundering warning from the Financial Markets Authority (FMA) last year, was removed from the FSPR on August 30. And according to Fullerton Markets'website, it has decided to transfer "all business" to Fullerton Markets International Ltd and Fullerton Custodian Ltd in Saint Vincent and the Grenadines. 

"This is to allow all clients to enjoy the dual benefits of faster on-boarding and a stronger fund safety proposition," Fullerton Markets maintains.

The company describes St Vincent as an offshore jurisdiction and points to a LinkedIn article by its Singapore-based CEO Mario Singh that describes St Vincent as a "more flexible jurisdiction to get licensed."

Fullerton Markets was deregistered from the FSPR under section 18(2) of the Financial Service Providers (Registration and Dispute Resolution) Act. Section 18 (2) sets out that the Companies Registrar must deregister a financial service provider if the provider requests this in writing. The FSPR is effectively a phone directory for New Zealand financial service providers. Anyone offering financial services must be registered on it, but registration alone doesn't mean an entity is licensed or regulated in NZ.

Interest.co.nz asked the FMA whether it had played any role in Fullerton Markets' deregistration from the FSPR given the FMA has the power to direct Companies Registrar Ross van der Schyff to deregister companies.

“The FMA has engaged extensively with Fullerton Markets regarding its intentions in the NZ market and its compliance with NZ law, including issuing a public warning about failures to comply with NZ AML/CFT [anti-money laundering and countering financing of terrorism] regulations," an FMA spokesman says. "The FMA understands the company has reconsidered its plans in the NZ market and has decided to deregister from the FSPR. This means the company cannot provide financial services in New Zealand.”

And a Companies Office spokeswoman says; "Following site visits to the registered office address of Fullerton Markets Limited by the Companies Office Integrity and Enforcement Team, and subsequent correspondence between Fullerton and the Integrity and Enforcement Team, Fullerton advised that it is no longer 'actively trading' and applied to be voluntarily deregistered from the Financial Service Providers Register and was deregistered 30 August 2018."

Meanwhile, Fullerton Markets Ltd's NZ-based chairman Gerald Carter says the company hasn't conducted any business in NZ for more than a year, and nor has it had any NZ bank accounts for some time.

"We have worked closely with the FMA to voluntarily deregister from the FSPR, and that took place last Friday. We will continue our full and enthusiastic support of the Hurricanes," Carter says.

Fullerton Markets Ltd remains a NZ registered company. It has previously said its clients were based overseas and touted itself as Asia's fastest growing broker.

The Government is striving to reduce mis-use of the FSPR by offshore controlled entities that register on it and operate overseas. As Commerce and Consumer Affairs Minister Kris Faafoi has put it; “Some mainly offshore-controlled entities have been 'free-riding' off New Zealand’s reputation for sound financial markets regulation by using their registration to imply that they are actively regulated in New Zealand when that is not the case." (There's more on this here).

An eventful time in NZ

Interest.co.nz first wrote about Fullerton Markets in December 2016 and we've published several articles since, which can all be found here. The unlicensed forex and derivatives trader attracted then-Finance Minister Bill English to its launch party in Wellington in June 2016. This came after an email from Fullerton to English's office said the company planned to employ 50 staff in Wellington, and sponsor sport and charities. Fullerton Markets subsequently told English it planned an Initial Public Offering.

Fullerton Markets has been a jersey sponsor of the Hurricanes rugby team, and also had sponsorship arrangements with the Wellington Phoenix, the Wellington Gold Awards, and the Wellys.

Singh is listed in Companies Office records as sole Fullerton Markets shareholder. However, the company's key man on the ground in Wellington was Malaysian national Chanthrueen Sarigabani. Sarigabani was forced to leave NZ in September last year after his attempt to renew his NZ work visa was rejected by Immigration NZ. And late last year Fullerton Markets' trustee, Kiwi Global Trust Ltd, laid a complaint with the New Zealand Police relating to about $4 million moved overseas from an ANZ NZ bank account.

By February this year Fullerton Markets had no office, director or staff based in Wellington, and now has the serviced offices of Auckland's West Plaza Business Centre listed as its registered office and address for service. 

According to the company's website, Fullerton Markets Ltd as a company will be retained. This, it's claimed, is because it has "built up significant brand equity" in NZ, especially through its sponsorship of the Hurricanes.

"The entity will remain within the Fullerton corporate structure in the event we decide to take the company public on the New Zealand stock exchange in the future."

Above: English pictured with Singh (centre) and Sarigabani. Picture below taken from Fullerton Markets' website. 

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Bank lobby group the New Zealand Bankers' Association (NZSA) is seeking a new CEO after the departure of Karen Scott-Howman.

An NZBA spokesman told interest.co.nz Scott-Howman resigned in late July. She rejoined NZBA in May 2016 as CEO, leaving a role as CEO of the Broadcasting Standards Authority. She previously worked at NZBA from 2009 to 2015 as deputy CEO and head of advocacy, and prior to that as regulatory director.

"During her lengthy time with NZBA Karen played an important role in helping ensure the New Zealand banking industry maintained a world class system with good quality regulation. Her strong professional advocacy has ensured our industry has had a strong voice on the issues that mattered, and we are grateful for her leadership. Deputy chief executive Antony Buick-Constable has stepped in as acting CEO until a permanent replacement is confirmed," the NZBA spokesman said.

A job advert says NZBA is seeking a proactive leader ideally from the banking or broader financial services sector to act as an advocate for the banking industry.

Interest.co.nz has thus far been unable to reach Scott-Howman.

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ASB will pay investors 3.31% per annum for $450 million it's borrowing via a five-year bond issue.

The interest rate on the fixed-rate bonds is based on a 1.02% margin over swap. The indicative margin was 1.00% to 1.05%.

The bank's currently offering a 4% five year term deposit rate for savers with a minimum deposit of at least $10,000.

ASB had been seeking to raise a minimum of $100 million, with the option of accepting unlimited over subscriptions. The unsecured, unsubordinated notes will be issued on September 7 and are expected to be quoted on the NZX Debt Market.

ASB's terms sheet is here.