The review of the culture and conduct of New Zealand banks sparked by the Hayne royal commission found no evidence of the systemic problems of their Australian parents, but that has not stopped the Kiwi regulators and the government from threatening tougher banking legislation.
The six month review by the Financial Markets Authority and the Reserve Bank of New Zealand identified "significant weaknesses" in the banks, but both regulators also said they did not consider "widespread misconduct or poor culture issues currently exist across banks in New Zealand."
However, the release of the report came with warnings to boards and C-suite executives that they need to improve their governance and management of conduct risks, and it looks likely the government will consider legislation to require banks to report on their culture and conduct and to give regulators more power to hold them to account.
As they pointed out in their joint press release, currently neither the RBNZ nor the FMA has "an express mandate or resources to regulate overall bank conduct", and it is this "regulatory gap" that is likely to be addressed by the Labour-led coalition government.
The regulators were especially critical of banks' self-congratulatory focus on short-term customer satisfaction rather than on monitoring long term outcomes for their customers, saying executive remuneration packages should not be based on short-term profits but "point to those longer-term outcomes" for customers.
They were also critical of the performance of the bank boards, and called for greater board "ownership and accountability".
Asked if he had confidence in the executives and directors of New Zealand's banks, FMA chief executive Rob Everett said it was clear the boards understood "why we have gone through this process and they understand the need to up their game in this space."
"There is focus on behavioural and conduct issues that wouldn't have been there a few years back. What we are saying is that if you don't want the Australian situation to replay here you have actually got to move quicker and you've got to move deeper. It's not that we feel there hasn't been appropriate focus or there hasn't been a will to get things done, it's just been too little and too slow".
RBNZ governor Adrian Orr added: "I don't have confidence that boards and bank management are willing to go above and beyond the call of minimum regulatory needs … here we are talking about that strange concept, social license, social expectations."
"You are talking to a central banker who has been for the last two decades in tough negotiations with banks around are they investing sufficiently in their own capital, are they investing sufficiently in their own operating systems and in their risk management including these customer outcomes.
"And that is a continuous challenge and I have to say it gets tiring. I would love to have a board that I had the confidence in that they would just do it."
Commerce and Consumer Affairs Minister Kris Faafoi's response to the report was that banks were now "on notice to lift their game". Everett said he absolutely agreed with that characterisation.
The talk may have been tough but (despite finding that 50 remediation activities had, or are, taking place and that customers are out of pocket to the tune of NZ$23.9 million) unlike in Australia, no names have been named, no executives or directors are likely to be sacked and no fines imposed.
As well as individualised work programs, the New Zealand banks have now been given until next March to provide their plans for improving customer outcomes, whistleblowing procedures and general governance.
The FMA and RBNZ will then decide if the changes made are good enough.
They want to see the removal of all incentives linked to sales measures and a review of sales incentives structures for frontline staff and through "all layers of management".
"And if some banks have decided not to change their sales incentives then we will be talking to the government about legislative options," Everett said.
Shortly after his comments, Prime Minister Jacinda Ardern held her own press conference in which she said the government would be "taking a good hard look at the gaps in regulation in the banking system so we can avoid wider systemic problems as seen in Australia".
She said the government would be continuing to watch the Hayne royal commission closely and asking the local regulators for a further report.
"It's fair to say today's report is not the end of the line on this issue, in fact in some ways it is the beginning of closer oversight and scrutiny, " Ardern said.