With the banking sector now thrust into the public spotlight following the controversy around ousted ANZ boss David Hisco, more competition is needed among New Zealand's major banks, according to economist Cameron Bagrie.
The Government earlier this week moved to make New Zealand's banking sector safer for customers through a deposit protection regime, with work also to strengthen accountability within the sector.
Appearing on TVNZ1's Breakfast this morning, Mr Bagrie - touted as one of New Zealand's most renowned and experienced economists - said that Mr Hisco's departure needs to serve as a warning for the banking sector as a whole.
"There are obviously some mistakes, things went a little bit wrong, the board acted, the individual involved paid a pretty big price," Mr Bagrie said.
"There was $6.4 million worth of shares forfeited. To me, that sends a big earthquake-style message to banking executives across New Zealand: Show the right sort of behaviours, show the right culture, show the right conduct. If you don't you're going to get hit in the pocket.
"That is a very big and loud message. It's a critical message, if you want to drive the right sort of behaviours, you've got to have the right sort of remuneration structures in place."
Senior executives, he explained, need "to have a bit of skin in the game".
"If something goes wrong ex-post, you can hit them in the pocket. That is precisely what happened with that remuneration package," he said.
"But it's not just the top of the tree. You've got to have the right remuneration structures down the bottom of the tree in regards to frontline staff.
"What's happened in the past couple of days [is] the banks have all signed up to remove, sort out frontline remuneration, so they're no longer incentivised to sell the mortgage, sell the credit card."
With New Zealand's "big four" Australian-owned banks having last year posted after-tax profits of $5.1 billion, the lack of competition is merely funnelling the profits into a smaller group - something Mr Bagrie said highlights the lack of competition among the New Zealand sector.
"I don't have too many problems with the big numbers, but as an economist if I have a look at the likes of banks' return on equity - which is after tax - just below 15 per cent. That's getting up there.
"That's amongst the highest across the banking sector around the globe. That suggests to me as an economist that there's a lack of competition in the market."
This year marks two decades since Mr Bagrie joined the banking sector.
"Back then, the model we got taught was look after your staff," he said. "Your staff will look after the customers. If the customer's looked after, then the shareholder is going to make money.
"What's happened across the banking sector is that we've taken the shareholder to the top of the pile. We've got this plague, it's called short-termism. It's about driving short term numbers rather than thinking about the long game.
"The big four are close to 90 per cent of the market. You have to ask yourself, is that a good thing or a sign of lack of competitive pressures? What are the reasons we don't have a more broad-based banking competitive sector across New Zealand?
"I have no problem with the banking sector making money. They're big entities, they need to be making money, they need to be big profits. I do question in regard to whether we've got sufficient competition across that banking landscape."
Mr Bagrie suggested open banking - the practice of sharing financial information electronically, securely, and only under conditions that customers approve of - as a way of increasing competition and ending the dominance of the "big four".
"One of the things I'd like to see turbocharged is open banking," he explained. "That needs to be Government-led as opposed to industry lead.
"Industry led, which is what is being done at the moment, they've got a pretty big self-interest: Maintain their existing levels of profitability to slow the process down."