Insurance companies and banks can expect an intensified supervisory approach as the Reserve Bank of New Zealand (RBNZ) has announced it is renewing its approach to financial stability.
The New Zealand regulator is updating its approach to prudential and supervision to boost the resilience of the banking and insurance sectors, RBNZ deputy governor Geoff Bascand said during the recently held Financial Markets Law Conference in Auckland. This will apply more vigilance and scepticism of financial institutions’ compliance and risk management. It means more investment in people and systems, more reviews, and a deeper scrutiny of boards and management.
“In short, we are recalibrating the rules and our enforcement of them,” Bascand noted. “We view our regulatory and supervisory tools and the ability to use them independently as a package.
“Our role is to monitor developments in the financial system, enhance its resilience by setting appropriate regulatory requirements and verifying they are being followed. And, if necessary, mitigate the impact to depositors and taxpayers of institutional distress or failure,” he said.
While market and self-disciplines are vital forces for ensuring firms serve customers and investors effectively, RBNZ said experience shows that they are not sufficient to protect the public interest and ensure a healthy and dynamic financial system.
“Regulated entities can expect our supervisory approach to intensify, and for the Reserve Bank to take enforcement action where necessary,” Bascand added.
RBNZ regulates and supervises banks, insurers and NBDTs, oversees payment and settlement systems, and monitors and liaises with financial markets to manage liquidity in the banking system.