Following our last article, the debanking debate has taken a new turn with NZ First MP Andy Foster's anti-debanking Member’s Bill being drawn from the parliamentary ballot barely a week after it was announced. The Bill raises questions about the balance between commercial freedom and the ‘right’ to banking services.

The Financial Markets (Conduct of Institutions) Amendment (Duty to Provide Financial Services) Amendment Bill (the Bill) amends the Financial Markets (Conduct of Institutions) Amendment Act 2022, due to come into force on 31 March 2025. This bill introduces a new regime regulating the conduct of financial institutions, requiring them to establish fair conduct programmes to ensure they treat consumers fairly.

The Bill would require banks to provide financial services to consumers unless there is a “valid and verifiable commercial reason” for refusing or withdrawing services. It would prohibit banks from treating consumers less favourably when providing financial services because of:

• environmental, social or governance (ESG) considerations
• climate-related reporting standards
• the consumer’s industry
• any of the prohibited grounds of discrimination in the Human Rights Act 1993 (already unlawful under the Human Rights Act).

The Bill challenges the well-established commercial law principle that businesses are free to choose both their contractual partners and contract terms. This principle was recently reinforced in the Gloriavale debanking case, where the Court of Appeal upheld BNZ's right to terminate the banking relationships, based on its terms and conditions.

As with all Members' Bills, success depends on securing broader political support. While National and ACT have both said that they intend to review the Bill, neither has committed to backing the legislation, and it is unlikely to win support with the Greens or Labour. The then Commerce Minister Andrew Bayly referred to the ongoing select committee inquiry into the banking sector, suggesting that National may wait for its findings before taking a position.

New Zealand's debanking debate mirrors similar tensions aboard. In Australia, where Coalition Leader Peter Dutton has pledged to introduce policies targeting ‘discriminatory practices’ against industries such as fossil fuels, agriculture, and forestry if successful in the election later this year. Globally, banks in the United States, Canada, and Australia have all withdrawn from the Net-Zero Banking Alliance.

Beyond Ideology: The business case for ESG

The debate about ESG often overlooks the reality that ESG considerations include real, material business risks, from regulatory compliance to supply chain resilience and climate change impacts. Banks' decisions to limit exposure to certain sectors often stem from pragmatic risk and credit assessment rather than ideology. The link between ESG and commercial risk means that the Bill is likely to have little practical impact, due to the broad “commercial reason” exemption.

However, given that the Bill introduces penalties of up to $500,000, the banking industry will be watching closely to see whether it gains broader support. We will keep you updated on the Bill’s progress.

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If you have any questions about the Bill or debanking generally, please contact one of our experts.