New Zealand’s banking regulator plans to tighten enforcement for non-compliant institutions after announcing a reorganisation of its financial stability group.
Under the revamp the Reserve Bank of New Zealand has created a new standalone enforcement department to sharpen regulatory actions brought against banks and other financial services providers.
Several Australian-owned banks have been mired in non-compliance controversies in recent years, especially Westpac which has reported longstanding problems measuring liquidity risks in its Kiwi business.
RBNZ deputy governor Geoff Bascand said the decision to establish a standalone enforcement department would enhance the central bank’s “more intensive” regulatory approach.
“The Enforcement Department will support the Bank’s more intensive supervisory and enforcement approach and help the Bank promote a sound and efficient financial system built on integrity, innovation and inclusion,” Bascand said.
“The Bank plays an important role in ensuring financial institutions remain sound and operate with appropriate conduct and culture, and we have a low-risk appetite for events that materially damage the financial system.”
Bascand said the standalone department was developing a new enforcement framework for the RBNZ that would include the formation of a special committee to oversee enforcement actions for serious or repeated breaches of regulatory requirements.
“The department will work closely with the different supervision teams across the range of regulated entities in the banking, insurance and AML/CFT sectors in tracking compliance breaches and applying an escalated response to serious failures,” Bascand said.
The new department will be led by former APRA manager Ben Carruthers who joined the RBNZ last year as a senior adviser.
Before joining the RBNZ, Carruthers worked 12 years at APRA, most recently as head of the Australian regulator’s litigation team.
APRA’s light-touch approach to dealing with non-compliant financial institutions was highlighted by the 2018 Hayne inquiry into banking conduct.
This included criticism of APRA’s failure to take swift action against misconduct by superannuation providers, including several Commonwealth Bank-owned subsidiaries.
The reorganisation of RBNZ’s enforcement functions comes as the New Zealand Treasury conducts a review into the regulator’s enforcement powers.