Geoff Bascand, deputy governor and head of operations at the Reserve Bank of New Zealand (RBNZ), has suggested that they need more resources rather than more power to better fulfil their role as prudential regulator of insurance firms.
The suggestion follows a joint statement with the Financial Markets Authority (FMA) on their disappointment with life insurers’ response to their conduct and culture review – noting that the firms “failed to demonstrate the necessary urgency” of the situation and have not sufficiently invested in the systems needed to properly monitor conduct risk.
Rob Everett, chief executive at FMA, has urged the government to give them more power so they can deal with potential problems for consumers before they happen. However, Bascand believes something else is necessary.
“We’re satisfied that our powers for our prudential purposes are adequate. We have the authority to look at the governance and risk management and to engage with them very purposefully about these elements,” Bascand said.
“In terms of resources, we can only do that lightly with the number of insurers that exist.” While RBNZ focuses on the most significant institutions for policyholders, “we’re limited in the depth of that.”
Bascand said that the government seems receptive to its plea for more resources.
“We’ve had indications from the government that they understand resourcing and funding is part of the need for a stronger regulator and that’s being considered in the phase-two stage of the review of the Reserve Bank Act, although that hasn’t got to the point of ‘a specific number,’“ Bascand said.
“The direction of travel is for us to be significantly more resourced and stakeholders are receptive to that.”
“I would never be able to promise that we could find everything and look at every institution. We would like to go more systematically through the insurance sector and have frequent discussions and more scrutiny over their practices than we do at this time,” Bascand concluded.