Top officials from the Reserve Bank and the Financial Markets Authority (FMA) will brief MPs on the outcome of their investigation into banking practices in New Zealand on Wednesday.
Reserve Bank Governor Adrian Orr and FMA CEO Rob Everett will give an overview following their demand New Zealand banks prove they're free of the sorts of misconduct that has surfaced in Australia's Royal Commission into financial services.
Financial and Expenditure Select Committee Chairman Michael Wood says this will be the regulators' first opportunity to brief MPs on their findings.
“We want to hear really clearly what has come out of that process, what steps they will be undertaking and what issues we as Parliamentarians should be aware of.”
Although Orr has said there is no need for a Royal Commission here, he says the onus is on the banks to prove their behaviour is different from their Aussie parents.
Finance Minister Grant Robertson agrees, saying the issue is “so significant, there is an obligation on New Zealand banks to show that evidence,” given the dominance of Australian owned banks in New Zealand.
Wood says MPs are going into the meeting with an “open mind.”
“[The regulators] have gone through the process of engaging with the banks and we have deliberately timed this hearing to give them some time to absorb what they have heard from the banks, so we can talk meaningfully about that.”
He does not have any indication of the RBNZ and the FMA’s findings yet but points to an article by Orr, released last week, detailing where it sees its role in banking conduct and culture.
In the article, Orr says the Reserve Bank aims to have “the best regulator-regulated relationship in the world built on mutual respect.”
After the briefing from the regulators, MPs will decide if it’s necessary to summon banking and financial institution bosses to testify in front of the committee.
“We have explicitly said we will leave the door open to a request that financial institutions might appear before the committee if we think there are further questions we think justify that,” Wood says.
“We will listen to the evidence we hear from the regulators, then take it from there.”
Orr and Everett will brief the committee at 2pm on Wednesday.
7 Comments
The excessive lending behavior based on profit growth might be within the rules but isn't beneficial to society in the long run. Giving the banks an opportunity for a self assessment pass mark highlights the problem with how we have structured our monetary system. Come down on them hard and fast.
Oh yup .. keep in mind if NZ banks fail, customer deposits are unsecured and customer's KiwiSaver funds are tenuous at best (often invested in bank shares). In an environment where customer deposits are unsecured and bank are constantly falling short of their capital requirements - more transparency needs to be given to customers.
NZ has a credit apartheid too .. if you're a property owner or a government subsidized enterprise, you can borrow large sums of money at historically low interest rates - everybody else either can't borrow anything or only small amounts at extremely high rates. Renters, artists, small businesses, students, migrant workers and those in the 'gig-economy' don't get a look in.
True it's important for people to save, invest and live within their means. What is also true is that to participate in capitalism, one needs capital/liquidity. It's often the weird people who break-the-mould and have the best ideas, biggest successes and subsequently develop businesses that contribute hugely. Such people are starting to pack their bags for greener pastures as successive governments have foolishly enabled the financial sector to get away with only investing in establish businesses and of course property.
The banks are open, in the sense that you can just look at the economy and know when OBR(s) are about to happen. There should be a sequence of events that unfold. Just like the 1930s crash events we will see similar.
So I expect plenty of warning. The problem is this is a monolithic economic and financial system so all markets will drop not just one in isolation, ie there will be no where to hide really.
Partially Govns, the RB is mostly to blame for the lack of investment, they saw housing as safe so encouraged banks to have a substantial mortgage portfolio after that the stupidity of no CGT took over.
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