The country’s financial regulators are scheduling on-site visits with banks and insurance companies to check the paperwork matches reality, the Reserve Bank of NZ (RBNZ) said last week.
In a statement issued last Friday, RBNZ governor, Adrian Orr, said NZ banks were first in line for face-time with the regulators who would ensure the “validity” of the institutions’ written responses to questions posed in the wake of revelations at the Australian Royal Commission (RC) into financial services.
“It was always our intention to do so, with targeted visits more effective than a simple download of the data and open-ended questioning,” Orr said in the release.
The RBNZ and the Financial Markets Authority (FMA) launched a joint offensive early in May seeking assurances from NZ banks that certain Australian financial institutional practices outed in the RC did not occur this side of the Tasman.
Later in May the regulatory JV sent similar demands to NZ insurance companies. Orr said the regulators would also visit insurance companies after sifting through their written replies, which were due last Friday.
The RC heads into round four this week with a focus on farming finance, national disaster insurance and how financial services firms interact with indigenous Australians.
Orr said despite the mountain of bank paperwork to sort through the regulators were making good progress with the analysis.
“We will assess whether the conduct and culture issues being aired during the Australian Royal Commission of Financial Services are present here,” he said. “A combined FMA/RBNZ team are working through the submissions received from banks in response to our inquiries. This is a significant task, but necessary to create a fact-based, fair, platform.”
Orr said to date bank management and boards had been “very open” during the regulatory investigation but it was “too early to draw broad conclusions”.
“There are many areas where further evidence is needed, as well as proof of intent where gaps have been identified and are being closed,” he said.
The FMA said in May the RC probe findings would likely be published in a ‘thematic review’ paper in a few months time. Also this year, the FMA has scheduled a thematic review of the NZ custody sector.
In May 2017 the International Monetary Fund (IMF) identified the lack of custody licensing as a potential weakness in the NZ financial system.
The IMF Financial Sector Assessment Program (FSAP) for NZ noted: “The provision of custody services does not require a license in New Zealand and, therefore, falls outside of direct supervision by the FMA —or by any other authority.
“The government could usefully require that these entities be subject to licensing and supervision.”
It is understood the FMA has engaged a third-party accountancy firm to conduct the custody review.