There’s no evidence of widespread, systemic issues to warrant a commission of inquiry in New Zealand, regulators have stated.
In a briefing to the Finance and Expenditure Select committee, the Reserve Bank of New Zealand (RBNZ) and the Financial Markets Authority (FMA) say current monitoring work on the issues recently highlighted by the Australian Royal Commission brings no evidence that an inquiry of the same scale is necessary in New Zealand. However, they acknowledge that the work they have initiated may test this view.
On May 4, the regulators called on licensed banks demanding they prove that consumers, regulators and other stakeholders can have full confidence in the financial services industry in New Zealand by May 18. Weeks after this, the regulators sent a letter to licensed life insurance companies demanding detail on how they have addressed the issues and themes arising from the Royal Commission.
During the briefing, the regulators said 11 banks provided their responses, which are being reviewed by a joint working group of FMA and RBNZ staff. The Commerce Commission is also reviewing matters relevant to its remit.
“The submissions are generally extensive and for the most part appear relevant to our request,” the regulators said. “Preliminary assessment has identified some variance in detail and the extent of work already completed and expected to be conducted in the future.
“Some responses indicate a proactive approach to conduct risk, while other banks have not yet begun to fully embed conduct risk, governance or oversight into their operations,” they added.
Other responses as outlined by the RBNZ and the FMA cover:
- A description of internal and external reviews conducted in recent years;
- Future programmes of work to address a number of areas and provide additional assurance;
- Examples of issues identified and their remediation processes.
The RBNZ and FMA said they will be requesting further information and verification from all the banks where necessary.
“A high bar will be set in meeting our expectations and demonstrating a sufficient level of assurance in regard to good conduct and culture,” they said. “Currently we consider it is appropriate to prioritise our work on banks and life insurers; we haven’t made any decision as to whether to expand that focus in the future.”
The regulators also said a number of relevant legislative frameworks are already under review, and that they, too, have significant existing work programmes across a number of relevant sectors.
“As we progress our inquiries, we will also identify any areas within the framework for regulation of retail financial services where we consider there are regulatory or supervisory gaps or inefficiencies,” they added.
The findings by New Zealand regulators are expected to be out in October/November. The Royal Commission is expected to issue an initial report in September 2018 and a final report, with recommendations, by February 2019.
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