Kiwiblog

Richard Meadows at Stuff reports:

New Zealand banks are wading into the Novopay disaster to offer interest-free overdrafts to teachers and school staff running short on cash.

Problems with the Education Ministry’s new payroll system have led to thousands of teachers paid incorrectly or not at all.

Some have reported being unable to meet mortgage payments or falling behind on hire purchase or credit card debt as a result of the cashflow squeeze.

The banks participating in the interest-free overdraft offer are ANZ New Zealand, ASB Bank, Bank of New Zealand, The Co-operative Bank, Kiwibank, SBS Bank, TSB Bank, and Westpac New Zealand.

They are offering six weeks of interest-free respite –until January 15 – up to the equivalent of any missed payroll payments.

Affected teachers and school staff have to provide evidence to their bank, for example a letter from their school, detailing how much they are owed.

Their bank will then arrange an overdraft facility on the account to which their salary is paid, or to another account by arrangement.

New Zealand Bankers’ Association chief executive Kirk Hope said the banks had offered their support to help tide people over the holiday period.

“I encourage affected school staff to get in touch with their bank so they know they’re covered and can have some peace of mind over the holidays,” he said.

A very smart PR move from the banks.

As I understand it any teacher underpaid can also get reimbursed within 24 hours by their school directly – and the school then gets reimbursement from the Ministry of Education.

However relieving teachers who have no main school, are less able to do this easily, so the move by the banks should be of assistance to them especially.

Stuff reports:

Slipped a cheque in the mail lately? Or left one on the back porch for the lawnmower man?

The stereotype of a cheque user is elderly and a little distrustful of the digital world.

But a study on how best to nurse cheques through their last few, terminal years has found that is not necessarily true.

Bank-owned payments regulator Payments NZ is working on a project to help its bank owners through the phasing-out process.

The results will not be public until later this year, but early hints confound some of the more common stereotypes.

The vast majority – about 90 per cent – of cheque users also use electronic banking, says Payments NZ chief executive Steve Nichols.

Only a small proportion is wholly reliant on cheques.

Most users write a mere five to seven cheques a year, suggesting they do most of their transacting by other means.

I do not think I have done a cheque for some years. I will even ring people and ask for bank account numbers than do a cheque. Thi is partly because I rarely go to the post office also, so dislike having to post things.

But more to the point Internet Banking means your bank records show who you paid and why. Cheques do not. Maybe a feature for banks to consider is the ability to electronically edit or tag transaction lines, so if you do write a cheque you can have recorded in your bank records who it was to, and why.

Labour and the Greens have set up their own inquisition inquiry into banks. The Herald reports:

An expert in banking has rubbished a planned inquiry and says banks are being treated as scapegoats.

Massey University Centre for Banking Studies director David Tripe said the inquiry should not be taken seriously.

Little danger of that.

What I find amusing is the opening statement on the inquiry site:

Many New Zealanders are concerned about the high level of interest rates

The floating mortgage rate averaged 6.44% in June 2009. In June 2008 when Labour were in office it was 10.9%. So they were not concerned about 10.9% but are concerned about 6.4%?

That reduction means a $250,000 mortgage homeowner is paying $11,250 a year less interest or has an extra $215 a week in the hand.

The Dom Post reports:

The Inland Revenue Department is asking the High Court to rewrite tax law in a $641 million tax avoidance case between it and the BNZ, the bank says. …

And:

BNZ is the first of the four main trading banks to challenge Inland Revenue’s claims of tax avoidance by using so-called structured financial transactions, involving foreign financial institutions between 1998 and 2002. The banks have been assessed to owe about $2 billion in unpaid taxes and interest. Inland Revenue claims the transactions generated tax losses through fees and hedging costs which the bank then used to offset other taxable income.

But BNZ’s lawyer Alan Galbraith, QC, said in his closing submissions to the High Court at Wellington that Inland Revenue’s case was “fundamentally misconceived” in the legal interpretation and tests, and the commercial and economic reality of the deals. Inland Revenue had also incorrectly inferred that, if Parliament had mistakenly failed to bar the use of structured financial transactions in tax legislation, the court could remedy the situation.

There is a lot at risk with these cases. I understand from informed sources close to one of the banks, that they have offered to settle the case for around $500 million. Informally it seems this was acceptable to Ministers, but that Crown Law was strongly against any settlement.

I understand that until the cases are resolved, there is considerable uncertainity over funding arrangements for the banks, and this is partly why interest rates are not dropping more.

I don’t know the strength of the Government’s case, but I imagine questions will be asked if they lose the case, after declining half a billion dollar settlement. And if the banks do lose, I suspect it will end up in the Supreme Court in a few years. And the problem is that until we get a final Supreme Court ruling, uncertainity may remain.

UPDATE: An informed source tells me that the Government is not facing much risk due to the Supreme Court decision in Trinity. They agree it will go to the Supreme Court but are very confident that the cost of doing so will be a small fraction of the eventual judgement.  Also that IRD generally can not agree to part settlements – only to reduce or waive penalties.