27 Nov 2019
New Zealand’s central bank said on Wednesday it was ramping up its scrutiny of banks and insurers ahead of its highly anticipated decision on raising bank capital requirements.
The Reserve Bank of New Zealand’s decision to increase oversight on financial institutions comes after a number of high-profile censures of Australian institutions, many of which are the parent companies of New Zealand’s top banks.
RBNZ Governor Adrian Orr said he was “very concerned” about Australian regulator AUSTRAC’s allegations last week of millions of anti-money laundering law breaches by No.2 Australian lender Westpac Banking (WBC.AX).
The RBNZ had contacted all banks to ask for additional assurance they were meeting their regulatory requirements, and was working closely with Westpac’s New Zealand subsidiary on the issues that had arisen in Australia, he told a media conference.
The RBNZ has been undertaking reviews which showed shortcomings around governance and risk management among New Zealand institutions.
“Our recent reviews of banks and life insurers, and the number of recent breaches in key regulatory requirements, reinforces the need for financial institutions to improve their behavior,” said RBNZ deputy governor Geoff Bascand in a statement accompanying the bank’s financial stability report, which is released twice a year.
“We have also reviewed our own supervisory strategy and will be taking a more intensive approach, which will involve greater scrutiny of institutions’ compliance.”
The RBNZ this year revoked Australia and New Zealand Banking Group’s (ANZ.AX) local license to calculate its own operational risk capital due to persistent control failures.
It has also stepped up monitoring of National Australia Bank Ltd (NAB) (NAB.AX) subsidiary Bank of New Zealand (BNZ) [BNZL.UL] after identifying errors in the lender’s risk capital calculation process.
Orr said the central bank was hoping to increase staff on its supervisory team and was focusing on ensuring bank boards and senior managers proved how they were meeting regulations.
By Charlotte Greenfield, Reuters, 26 November 2019
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