Taking Stock 21 May 2026

Chris Lee writes:

THE latest victim of groupthink is Craig Stobo, briefly the head of the Financial Markets Authority.

He has resigned because he took too long to resign from a private sector directorship, and because he made submissions to Parliament, and was widely quoted, that groupthink declared to be heresy. His public submission and remarks on the Treaty Principles Bill “did not meet the standards or political neutrality expected of the Chair of an independent Crown entity and financial markets regulator”.

As an example, he doubted the value of imposing Treaty of Waitangi conditions on financial market protocols.

So the FMA required him to resign.

I doubt Stobo will rue this loss of a donation of his time to financial markets. Stobo has had enough years in markets, and enough financial success to have many options without the modest stipend of an FMA chairman.

My guess is that when approached by the government to take on the role, he accepted because the government knew enough about him, including his private opinions, to feel sure that the FMA would benefit from his knowledge and experience.

He had the time to take on a task that is thankless but had the potential to improve financial market behaviour. He had enough assets and investment income to forgive the relatively modest emolument.

His career had included roles as a Chief Investment Officer, a Chief Executive, an economist, a professional director, a business owner and, I record with wry amusement, a diplomat.

His real sin was that he had made a submission on the Treaty of Waitangi bill that apparently conflicted with the FMA’s Te Ao Māori strategy. In particular, he displayed opinion in a newspaper supplementary, which interviewed people ranging from successful leaders to those who aspire to have their views recorded. Note many successful leaders decline to participate in such content.

He failed the public sector neutrality test. Diddums.

As an aside I am unsure how the most hysterical of the “consultants” used in public areas, like Fast Track hearings, can ever claim to be “independent experts” when they so visibly froth at the nose and mouth when asked to display reasoned judgement.

Stobo is hardly a rabid right winger.

He has assisted Labour and National governments, including a large contribution to the group which reported to Cullen on tax during Clark’s years in government.

I disclose that I am relatively unknown to Stobo, having met him only once in my 50 plus years in capital markets and even that was little more than a “gidday” greeting.

I regret his resignation. He knows business, he knows financial markets, he has grey hair, he has authority and he has opinions. This sounds like someone whose wisdom would mean something to those who are regulated by the FMA.

Contrast this with a previous FMA director whose shallow knowledge and high ego led to the FMA chairman demanding that the non-contributor be silent at committee meetings, exactly what should happen to “woke” politically-correct appointments.

This might have been just how Stobo might have responded to an empty vessel!

- - - - - - - - - -

THE announcement to financial markets that an infringement of the law may cost ANZ $123 million has a somewhat eerie echo to it.

ANZ has lost in the High Court its case to sidestep penalties for a four-year infringement of what was admittedly a poorly constructed law.

Written during Key’s government’s term, the law stated that if banks did not properly disclose the exact cost of consumer loans, then until the banks corrected the error no interest or fees could be charged. None.

Any such fees or interest collected must be reimbursed.

The law had good intentions but was poorly drafted.

Obviously, it would be strange if the client was not disadvantaged yet was entitled to a free loan till the bank discovered an admin error.

But the law is the law.

Any wise bank board would insist that the bank management check and double-check that its software was correctly describing the cost of the loan in its loan documents.

ASB and ANZ had faulty software and failed to correct it for some years.

Theresa Walsh was the chair of ASB and John Key the chair of ANZ when the errors were found.

Walsh by then had the poison chalice of chairing Air New Zealand.

Key had been chair of Air New Zealand.

Neither would be my choice to chair any bank.

You could say both would have had informal access to the NZ Prime Minister, Christopher Luxon, who had been CEO of Air New Zealand.

It is hard to imagine that there would have been no input into the need to change the law, correcting what was overkill, now costing banks heavily.

The law was changed but did not release previous infringements from penalties.

The really odd aspect is that the banks – read ASB and ANZ – warned that the penalties could cost billions and destroy bank balance sheets. This seems little more than estimates to catch a media headline; scaremongering in the hope of having the law changed, retrospectively erasing extreme penalties.

When that response arrived I produced some arithmetic, which politely concluded that the banks were talking scary, but highly improbable figures. The cost could never have been multi billions, a contrived figure.

We now know ASB agreed to pay around $130 million to settle the claim out of court.

ANZ went to court and lost.

The ANZ now says its cost may be $123 million.

Um. Ah. Pray tell us what happened to the claim of “billions”?

That number was created to exert pressure on the politicians? For once the Government was not fooled, perhaps helped by reading Taking Stock.

Frankly the law was unreasonable, reflecting some careless unthinking analysis by those who promulgated the legislation – Key’s government.

My analogy to put this law into perspective looks like this.

The normal highway speed limit is 100 kmh.

If road workers are repairing potholes they will arrange for 30kmh signs to reduce the danger of being hit. If they finish the repair and go home they should take away the signs.

If they forget and leave the signs and I come along and fail to slow to 30kmh, I will lose my license for travelling 70kmh faster that the (temporary) speed limit that was left in place in error.

You might hope any vigilant police officer policing traffic with a radar trap would accept the stupidity of this, but I have seen exactly this happen on the Desert Road, where a young mum was stopped and probably lost her licence for a roadworker’s error.

I sought to intervene on her behalf and was advised curtly to reposition myself, in language commonly used in Lady Chatterley’s Lover.

The bank disclosure law was right to demand accuracy but absurdly inflexible in accessing penalties without taking account of the consequence. Key and Walsh had failed to push their bank CEO to be careful not to infringe. 

Those who borrowed at a rate wrongly calculated are getting an undeserved huge bonus.

The banks have learnt a lesson and deserved some sort of penalty. Hopefully any poorly or carelessly governed banks will have learned a lesson.

Pay attention to the letter of the law.

- - - - - - - - - - -

WHEN Taking Stock recently detailed a logical process to follow when building or reviewing an investment portfolio, its focus was on changes that are affecting our future.

Global power plays, changing attitudes to international law, demographics, inequality and weather changes were all listed.

I omitted to include the need to rid ourselves of the left-wing ideology that permeates our universities, many well-paid people feeding clickbait views to our media. Artificial intelligence may undermine the current university model. Silly abuse of the education process will hasten the difficulties of our universities. Do universities need to pay people to disburse ideology?

The recent realism which frames our political and social ambitions discussed by Prime Minister Luxon last week add a burst of more cold water to those thinking about the medium and long term.

Luxon, in shorthand, warned that our Covid-fed debt is eating at the confidence of those who lend us capital. Ratings agencies signal this concern.

And he warned our annual balance of taxes received, less committed expenditure, is locked in a deficit, meaning nothing will improve this, except change. Most call this a dangerous structural deficit. We demand more than we will fund.

I nominated a rewritten superannuation policy and new taxes on realised capital gains as inevitable components of necessary change.

Yet the suggestions are not enough.

Witness the politician whose voting base will likely hold the key to the next coalition. He is gluing himself to the road to slow down a review of the super scheme.

New taxes from new businesses clearly is an essential option. 

To put this in perspective I reviewed the potential of the largest projects awaiting authorisation to proceed. They will include the proposed coal to urea project in Southland, the proposal to sweep up non-carcinogenic fertilised pebbles on the Chatham Rise and the most shovel-ready gold project at Bendigo Ophir. 

Between them they would expect to produce a billion of extra taxes each year, as well as pay their workers a world-class wage.

There are other extraction projects with high hopes, including critical mineral projects on the West Coast of the South Island, and the gold mines near Reefton. (Edward will write about one of these projects in a Taking Stock newsletter in June.)

In essence their progress relies on careful mitigation of any high-risk factors (worker danger, environmental risk, project failure). New Zealand’s open pit mining record is impressive.

The projects will rely on the government educating New Zealanders to welcome the projects as the best way of reversing the decline on our living standards. That is, growing our revenue; no growth, poorer services, fewer opportunities to offer a step-up to those most in need.

The government will rely on New Zealanders accepting that compromises like the shifting of hillside walking tracks, and repositioning of some of the multi-million lizards in barren areas are needed to offset the incremental reductions in the slide of our living standards.

If NZ does not aspire to mobilise the unemployed (or barely employed), to widen our revenue base, and to lift average wages and productivity, then it can forget about building the infrastructure to support a recovery, or even maintain our current levels of support, e.g. will Air New Zealand need more Government support to support its social and political obligations, in a difficult era?

Without more revenue we would then be a naturally-rich country with ample water, arable land, sunshine, widespread mineral resources – and no money for school lunches, or to motivate school leavers to gain skills and knowledge that result in a busy, enjoyable life, contributing via their productivity.

In coming weeks there might be many ideas put into the public area that will require a mindset change, from  the brigade who believe that redistribution of our wealth would solve the problem. 

The media in general terms will always favour wealth redistribution and subsidies. Happily, the media has no say in any outcome.

Thank goodness we are in an election year, when these issues will be debated in areas not controlled by the Otago or Wellington newspapers.

- - - - - - - - - -

Travel

28 May - Kerikeri - David Colman

29 May – Whangarei - David Colman

30 June - Christchurch - Chris Lee

1 July - Christchurch - Chris Lee

Chris Lee & Partners Limited