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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