Regulators say no evidence yet found to warrant NZ banking commission of inquiry

Reserve Bank governor Adrian Orr and FMA chief executive Rob Everett at the Finance & Expenditure Committee hearing.

The Financial Markets Authority and the Reserve Bank of New Zealand say monitoring work on New Zealand banks they have undertaken to date has not turned up any evidence of widespread, systemic issues that would warrant a commission of inquiry.

However, they have told Parliament's finance and expenditure committee today that work they have initiated may test that view.

The regulators briefed the committee on the Australian royal commission into misconduct in banking, superannuation, and financial services industry which was set up in response to a number of misconduct incidents within financial services over a long period. An initial report in September is expected from that royal commission and a final report with recommendations by February next year.

The FMA and Reserve Bank say their concern about the royal commission’s impact on confidence in New Zealand’s financial institutions and the potential “for complacency in the New Zealand industry” led them to take action.

The Reserve Bank governor and FMA chief executive met 16 chief executives of New Zealand banks, including the four major Australian-owned banks, seeking assurance on issues identified in the Australian inquiry.

Following that meeting, the regulator, with the support of the Commerce Commission, wrote to 10 locally incorporated banks with major retail operations in early May, initiating a review of conduct and culture. The banks were given a May 18 deadline to respond to these main questions:

• the actions the banks’ boards and senior executive teams have taken to identify and address conduct risk;

• any specific plans and actions the banks have undertaken or are under way to respond to the issues and themes arising from the royal commission;

• any other work under way or planned to proactively identify and address potential conduct and culture risk; and

• any work under way to remediate any identified issues where bank conduct has resulted in detrimental outcomes for customers.

Although insurance hasn’t yet featured in the Australian inquiry, the Kiwi regulators also wrote to 15 major life insurance companies on May 23 asking for a response by June 22.

The bank responses are now being evaluated although a preliminary assessment indicates some variance in detail and the extent of work already completed.

Some responses indicate a proactive approach to conduct risk, while other banks haven’t yet fully begun to embed that, along with governance and oversight, into their operations, the regulators say.

They will request further information where necessary, the regulators say.

While the inquiries are centred on banks and life insurers, no decision has yet been made on whether to expand that focus in future.

Other existing reviews and reports include the Financial Services Amendment Bill now at select committee consideration stage, which will strengthen the financial advice regime, a review of insurance contracts law, an MBIE review of consumer credit regulation, and an FMA review of bank sales incentive structures.

More to come


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32 Comments & Questions

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Funnily enough the heads of our banks parent companies changed their tune recently - let’s see what comes crawling out of the woodwork here eh?

The heads of the big four banks have admitted their longstanding opposition to the royal commission was wrong. The CEOs of ANZ, NAB, CBA and Westpac have told the Weekend Australian that damning evidence heard this week has proved the probe is 'necessary, and justified'. After opposing the idea, the banks called for the commission in November, believing it would act as a political ­circuit-breaker rather than revealing serious misconduct.

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Bold move by the RBNZ governor and FMA CEO

It's now on their heads if they are wrong - which is highly likely.
The Banks are legitimized gangsters

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Criminal not to investigate criminal banks

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Well said The Scribe. I'm a bit surprised that your "The Banks are legitimized gangsters" was published. Might it not be considered "legally questionable," although "truth" is always a defence against defamation, so maybe tht is why it made it. I do agree with you totally. In the old wild west the bank robbers ROBBED the owners of the banks, NOW the robbers ARE the owners

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Emperor has no clothes
Even Aussie the land of convict genetics needs to do it

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Absolutely It's only those who are not experts and are awake who can/choose to see the truth, the rest, regulators, vested interests, corporate media can't afford to see/acknowledge the truth because the nakedness would then be TRULY exposed

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Media (particularly printing) live on ads - banks & insurers are big ad spenders
Too may other vested interests at play
This is sucking large % out of economy & retirement savings

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The big banks have been bullies for many many years now. There is one thing that the banks do well, and that is they look after the banks. It's the same in the insurance game as we've witnessed across the ditch. I don't know what all the fuss is about to be fair. We've all known for ages that the
big banks have been creaming it so it will be interesting to watch the roll out of the block chain technology over the coming year or so.
Business without banks. Now there's a thought.
So, how can we get rid of the lawyers?

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Henry VI, Part 2 by William Shakespeare?

Just joking lawyer friends....

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Spot on as usual Graeme. Bankers, lawyers and politicians are the ones we need to get rid of, problem is that category 3 is full of categories 1 & 2. The hope for "we the people" is decentralised crypto currencies, but the banksters are already trying to "get in on the act" so that they can retain their control of the masses. As far as "the insurance game" is concerned, it's certainly NOT limited to "across the ditch," you have only to look at the 40 Billion POUNDS refunded in the UK on "mis sold (just LOVE that word!) PPI. As far as what can we do is concerned, cryptos are maybe 1 solution but a simpler one is local community currencies created debt free by the people. Have a look at Christchurch and bristol for starters. Time banks and community savings pools are also alternatives. They would be part of "the circular economy" that featured in a recent article here

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Bloody joke ---- A bit like the referee asking Richie McCaw to tell him when he is cheating, or if he cheated. Hell we know he did all the time, its the referees job to stop him. But hey if the referee is that dumb then play to the whistle.

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Obfuscate- to make something less clear and harder to understand, especially intentionally: Could “has not yet turned up any evidence” followed by “work they have initiated may test that view” just possibly meet the definition of “obfuscate?”
I personally feel that it was more “pressure” from NBR than “ concern about the impact on New Zealand’s financial institutions” that brought about any of what is going on now.
I wonder if any of the public will get to see the answers to the 4 questions put to the banks, I would be very interested to see them. How about it Mr. Orr? Kiwi regulators have written to 15 major life companies even though insurance has not yet cropped up in Australia. I wonder if they think that only life companies could/might come under the spotlight in Australia. If so, I suggest that they have a look, if they haven’t already, at the Terms of Reference especially (b) whether any conduct, practices, behaviour or business activities by financial services entities fall below community standards and expectations and “financial services entity includes a general insurer.” There might well be at least 1 Kiwi General Insurer that “gets its collar felt”

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You have no idea what real shmoozing is until you see a regulator at a Bankers' cocktail party.

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Could/should that be categorised as "Fraternizing with the enemy?" I feel that it ought to be.

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one cannot expect an institution with a conflicted board to institute any changes that would impact the finance sectors profitability.the end game will be increased disclosure but continued adverse outcomes for customers.

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I agree with you 100% Brent, but I honestly believe there is sooooooooooo much more to it than simply a conflicted board, by which I assume you mean the FMA. There is also the FSC Board, the NZBA, the RBNZ, then there is Massey University’s financial literacy programme, sponsored by Wetpack. There was recently the Sustainable Business Network article here about the circular economy for Auckland. A local currency would work very well in an economy the size of Auckland but there was no mention of it I went and had a look at the SBN website and there is nothing about local currencies, I did find that Wetpack is a member, which surprised me initially, but not after reading their “blurb” there. BNZ is also a member and this would explain, to me at least, why there is nothing about community currencies, time banks and community savings pools. They all would, to use your words, “institute changes that would impact the finance sector’s profitability” and that cannot/must not be allowed to happen, even though it would benefit “we the people.”

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Latest from my AFR subscription "ANZ Bank New Zealand sells OnePath Life NZ to Cigna for $NZ700m " Could certain rodents be abandoning their aquatic transportation vehicle?

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Latest from AFR "ANZ Bank New Zealand sells OnePath Life NZ to Cigna for $NZ700m " are we seeing VIPs (Vertically Integrated Providers) turning into LIPS (LATERALLY Integrated Providers)? "The transaction includes a 20-year distribution agreement, or strategic alliance, so that Cigna will provide life insurance to the bank's customers." Let's see, does that sound a bit like the AIA/Sovereign/CBA deal? Does to me at least

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Some are done, not yet read, good to go

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& both in charge of have they been naughty.......
I want same on my speed camera tickets

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It's the FMA, enough said.

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There have been enough issues in New Zealand to warrant a Commission of Inquiry into banks;
-the ING / ANZ mis-selling issue,
-the tax issues the banks had which (most) lost, at least partially against the IRD,
-the thin capitalisation rule necessitated by profit shifting.
-banks selling farmers complex derivatives to get 'cheaper' mortgages,
-ANZ advising a client to put most of their $540,000 investment into ANZ products and saying their advice was not influenced by their relationship with ANZ (NBR 1/5/18).

I would be surprised if no bank in NZ charges for advisory fees when the client receives no advice (like in Australia).

Other issues won't come into the spotlight until a bank gets into trouble. Most banks invest most if not all of client's cash and bonds in their own bonds, accounts. Won't be an issue until a crisis, then too late.

Bring on a Commission of Inquiry!

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Most of the comments here smell of mob hysteria. I would have expected better from NBR subscribers.

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"mob hysteria"? Maybe. I believe that the comments you allude to are clear evidence that there are more and more New Zealanders who are getting to adulthood completely without any knowledge of the reason and purpose of money. What their parents failed to teach them as children, the market is forced to try and teach them, in these cases it to seems to have failed. So what we have here are posters, regulators, comm-comm all running back and forth looking for a scapegoat, instead they should pause for a while and consider just how graphic their posts are so accurately portraying their ignorance.

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Well saidI have been a subscriber here for only a short time and would not consider the comments mass hysteria by any stretch. My limited first hand knowledge is that the regulators are part of the problem not the solution, just like the banksters who are treated as sacred cows not to be touched at any COST, literally, and COST being the opertive word. It is not just New Zealanders GETTING to adulthood without knowledge etc., it is also the retired who are also financially ignorant and still in debt. It is the propaganda (disinformation) put out by the banks, politicians and the corporate media, the fiddle so well played by the vested interests and the powers that be, that are responsible for the financial ignorance. I asked a lady only tonight what would the bank do if you hd $10,000.00 in call account? She gave the usual answer, "OH, they would lend it to somebody." Ithen aked her if the money in the account remained her's, "Oh yes, of course" I rest my case

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I wonder if our "regulators" saw the latest about ANZ in Australia coming and if it might cause a review of their position. I think I see "black swans" gathering.

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And who promoted you to "judge and jury"?
NBR moderators?

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I am sorry you feel that way Mr. Morrison.
I am nobody of importance, merely a subscriber who comments, expresses opinions, asks questions, reads and listens, and also learns quite a bit. Do you not do the same? Like today for example. Deutsche Bank is in the news again. i was listening to my daily x22 report and "Camels" were mentioned in the context that Deutsche Bank had been put on the Federal Reserve's "CAMELS list. I did a search and, sure enough, there it was. Deutsche Bank had just been placed in the CAMELS "troubled section," quite serious apparently. Looked a bit deeper and found "Deutsche Bank : Shares Tumble on 'Troubled' Status News" Shares in Deutsche Bank AG (DBK.XE) fell as much as 6% on Thursday after the Federal Reserve designated its U.S. business as being in "troubled condition," throwing a negative spotlight on a bank already facing challenges.
The designation, which took place about a year ago, is one of the lowest used by the Federal Reserve. According to people familiar with the matter, it has affected decision-making at the bank on issues such as risk-taking and has influenced Deutsche's relations with other regulators, they said.

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Please do not feel sorry for way I feel. I would rather you and NBR try and understand the way I feel
You and your fellow posters are coming across as nasty vindictive individuals who have pronounced "guilty" before the jury is even retired to consider.
These wailings are designed for one purpose only and that is to encourage politicians to further regulate the banking sector which will only add unearned increment to the cost of dealing with banks.
A cost they must, and will, recover.
It must/will further weaken the peoples economic savvy.

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Goldman VP charged with insider trading, bank puts him on leave
A seven-count criminal complaint unsealed Thursday charged Woojae "Steve" Jung with trading with an unnamed co-conspirator on material nonpublic information he accessed while working at an investment bank with offices in New York and San Francisco.
The complaint did not mention the firm by name, but the only FINRA record for a Woojae Jung lists Goldman Sachs as the employer.
"We are aware of the situation regarding Mr. Jung and are cooperating with legal authorities on the matter," Goldman said in a statement.

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Deutsche Bank's problems continue "Deutsche Bank's credit rating was downgraded on Friday, delivering another blow to Germany's biggest bank.
The downgrade by S&P followed reports that the Federal Reserve had labeled the bank's US business "troubled," news that sent its shares tumbling Thursday to a record low." If you want to know more just do a search "Deutsche Bank Downgraded.
Could there be a thread here? "In a separate blow, Bloomberg reported that Deutsche Bank faces cartel charges over its role as underwriter for a A$2.5 billion ($1.9 billion) share sale by Australia & New Zealand Banking Group Ltd. in 2015. Citigroup Inc. also faces the same charges." If things continue the way they seem to be, our regulators may have to be looking at a different type of enquiry into the banks. There is a good alternative news site called "ZeroHedge" which is worth a look

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Where Australia and the UK lead, are WE likely to follow?
1) Australia-"Australian Mortgage Broker advert "Business Loan With A Guarantor. How to buy or expand your business with no deposit. borrow 100% of the costs without a deposit"
Westpac has urged the royal commission not to recommend regulation that made it harder for guarantors to underwrite business loans for family members, arguing this would cut off a key supply of small business credit to the detriment of the economy.
During a three-hour grilling in the witness box on Tuesday, Westpac's head of commercial banking Alastair Welsh defended the bank's decision to accept a guarantee from frail pensioner Carolyn Flanagan, despite her ill health and questions about the use of pre-witnessed and undated documents.
NAB and Westpac say more parents guaranteeing kids' loans. More parents are guaranteeing their children's home loans to help them enter the property market, two major ban
In a phenomenon dubbed the "bank of mum and dad", fast-rising prices in Sydney and Melbourne especially are causing more first home buyers to depend on parental help through loan guarantees or cash transfers.
2) UK-Bank of ‘mum and dad’ puts brakes on UK mortgage lending
But parents will still help 316,600 grown-up children buy property in 2018, including almost one in 10 of those aged over 55.
100% mortgages that crashed the economy are BACK: Barclays and the Post Office are among big lenders offering the loan deals to attract first time buyers without a deposit.
100% mortgages and parental guarantees. Another weapon of mass finanical destruction? This time the banks can get 2 for the price of 1 or BUY 1, get one FREE!

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