Australia’s Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry appears to be having a direct flow-on effect into the New Zealand market.
Financial Markets Authority Chief Executive, Rob Everett, and Reserve Bank of New Zealand Governor, Adrian Orr, have jointly given the NZ banks a deadline to demonstrate their operations are not rife with conduct and culture issues that have been identified at the Australian Royal Commission.
The regulators sent a letter to the chief executives of the banks and the New Zealand Bankers’ Association last week, and have until 18 May to demonstrate to the FMA that they have “…obtained assurance that misconduct of the type highlighted in Australia is not taking place here”.
“We expect you to show us what you have done in order to be comfortable that there are no material conduct issues within your business,” the letter stated.
It continued “…the window for you to demonstrate to consumers, regulators and other stakeholders that they can have full confidence in the financial services industry in New Zealand is narrow, and we encourage proactive leadership from the retail Banking sector.”
“We expect you to show us what you have done in order to be comfortable that there are no material conduct issues within your business.”
The letter also stated that an open invitation from banks to the regulators to examine their operations would not suffice.
Following issues revealed to the Australian Royal Commission (see: Royal Commission: AMP, Banks May Face Criminal Charges Over Advice Failings; AMP Chief Executive Resigns), a flood of opinions has been reported in mainstream NZ media on whether New Zealand should have its own Royal Commission into banking practices.
BNZ and Commerce Minister Kris Faafoi have both indicated they see no reason for a banking enquiry in New Zealand, while Prime Minister Jacinda Ardern said she is watching the Royal Commission in Australia closely.
Kepa Head of Home Loans, Rupert Gough, said that the dealer “…supports any action undertaken by the banks to reduce conduct risk and identify issues in the bank and with Adviser/customer relationships”.
“The update remains in line with our Fit 4 License model in which we will require all Mortgage Advisers to use a uniform CRM system that can easily be monitored for audit purposes. Kepa’s goal, like the FMA’s, is to maintain maximum customer confidence in the financial services industry and we intend to do this with our licensed model providing a quality, consistent advice platform.”
Auckland adviser, Michael Cave, said he doesn’t believe a Royal Commission is needed in New Zealand.
“I agree with new Reserve Bank Governor Adrian Orr when he says things are infinitely better in New Zealand than some of the activity we’re seeing in Australia,” said Cave.
“The overall culture of New Zealand’s financial and banking sector is much better. We don’t need not a complete overhaul. All we need are some regulatory upgrades and so in that regard the proposed legislation is completely fit for purpose.”
Click here to read the FMA letter to New Zealand banks.