Banks shouldn’t have to guarantee jobs

by Jake Quinn

Yesterday Finsec (the finance sector workers union) hosted by the Greens, delivered a petition carrying 10,000 signatures of support to Finance Minister Bill English.

The petition asked government to force banks to make job protection a condition of receiving the wholesale borrowing and retail deposit guarantee schemes which, in effect, would force government to remove banks from the scheme if they shed staff.

Mr English politely told them to bugger off.

As the standard wrote yesterday: “at a time when banks are making combined profits in excess of $2.5 billion and CEOs receive salary packages of more than $2 million each”, the idea of banks doing something extra to protect  jobs (and that government should be encouraging them to do so) is sound.

So it comes as no surprise that:

The results of a UMR public opinion poll show that 79% of New Zealanders believe the Government should require banks to maintain staff levels in exchange for the guarantee on customer deposits and bank borrowing.

The question however, was loaded in favour of a positive response. Another way they could have put it would have been:

Should New Zealand banks, who are paying a substantial sum to the government to be protected by the guarantee on customer deposits and bank borrowing, also have to guarantee job protection to their staff, no matter what impact this would have on the financial position of their organisation?

This question is not scientific either, but you get my point.

The government will in all likelihood make hundreds of millions of dollars from the guarantee schemes. And they should. The liability for the schemes, if paid out, would bankrupt the country. So the fee structure needed to be such that it made enough to cover its ass in the case of a minor bailout and was not too attractive (or affordable) to those fringe institutions that are more likely to go bust.

The guarantee schemes are in fact a form of job protection and in a way the banks are paying for them by being signed up. If government hadn’t set up the scheme in the first place it would have put our banks (and all their staff’s jobs) at serious risk. Fortunately, our banks are doing just fine, and most of their staff still have a job.