Economy

RBNZ places country's largest bank under scrutiny

RBNZ places country's largest bank under scrutiny”

"A deposit protection regime will increase public confidence in the banks", Robertson said. However, the OECD and International Monetary Fund have said that our banking system might be more vulnerable in a crisis because we don't have a deposit protection regime.

New Zealand's banks have committed to ending sales incentives for frontline staff and their managers following pressure from regulators.

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The deposit insurance scheme may allow the RBNZ to step back from some of its more extreme proposals, but it is also something of a rebuke to the RBNZ's laissez-faire approach of more than a decade.

"The government is also making sure New Zealand follows worldwide best practice for promoting public confidence in our banking system, including on the issue of depositor protection", Robertson said. Australia introduced a guarantee on deposits of up to A$250,000 ($174,000) in 2008 at the height of the global financial crisis, while the US guarantees deposits of up to $250,000 and the United Kingdom guarantees up to 85,000 pounds ($108,000).

The government has also signalled that it is looking at sheeting home accountability directly to individual bank executives, similar to Australia and Britain, which have systems nominating individual decision-makers at banks, who may be held directly responsible in the event of problems.

While the second report would assess the effectiveness of ANZ New Zealand's Director's Attestation and Assurance framework, focussing on internal governance, risk management and internal controls.

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Analysis - The days of light handed regulation of the banking sector look to be coming to an end.

In the first report, ANZ is required to provide information on its compliance with the RBNZ's historical and current capital adequacy requirements.

Today the central bank said it had requested two reports from the ANZ under Section 95 of the Reserve Bank of New Zealand Act 1989 which gives the Reserve Bank the power to require a bank to provide a report by a Reserve Bank-approved, independent person.

Last week, ANZ said its New Zealand CEO, David Hisco, a veteran of ANZ since the 1990s, left after a dispute over personal expenses including his logging payments for chauffeurs and wine storage as business expenses.

In an interview on TVNZ's Q+A this evening, the deputy prime minister said he thinks "it's wrong that Mr Key can be head of the ANZ in New Zealand and sit on the Australian equivalent as well".



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