Time for a banking culture check, says Orr

Updated

Reserve Bank Governor Adrian Orr leading a team of Reserve Bank staff across the Terrace and across the road to Parliament. Photo by Lynn Grieveson

The New Zealand directors of subsidiaries of the 'big four' Australian banks have been put on notice by the new Reserve Bank of New Zealand governor to ensure they are acting in New Zealand's interests and in tune with New Zealand's banking culture, not that of their parents across the Tasman, reports Lynn Grieveson.

At a media conference following his first monetary policy statement (in which the OCR was left unchanged at 1.75 per cent), Adrian Orr said the culture of the kiwi subsidiaries "have to be for New Zealand and consistent with our culture and expectations".

He said the directors needed to "work with their banks and their CEOs to make them understand 'you are in New Zealand'".

Asked if he was surprised by the revelations of banking misconduct emerging from the Hayne royal commission, Orr said he was, but added the central bank (which also has the responsibility for banking regulation in New Zealand) had "upped" its work around banking culture.

"What I want to say is 'we understand, we know, we are doing our job'."

And to the banks, Orr said the message was: "show us how it is different to what we are hearing from Australia - and we will be playing that out very clear and publicly."

"And I think a cultural check and if necessary a cultural readjustment is extremely timely."

"These are New Zealand licensed and registered institutions. They may be owned from offshore, the vast bulk of them, but they are here to do business in New Zealand for New Zealanders and when they attest they are attesting to New Zealand laws and our regulatory behaviours," he said.

Later, when asked about the Hayne royal commission, which is being closely watched in New Zealand, Orr again returned to his message.

"What the public hears is a confusion of banks getting confused that they operate in New Zealand. You operate in New Zealand, banks," he said.

Orr also said that he would have a new style as RBNZ governor, which will see the central bank being more accessible and open – and more outspoken about its regulatory activities.

"What I think what this institution has been suffering from is a lack of open dialogue around what we have been doing for a long period of time. Instead we have left the banks and/or commentators own that space and not us," he said.

He reiterated this when appearing later before the Finance and Expenditure Select Committee, where he told MPs the RBNZ was "very, very in the face of insurance and banks at the moment around a whole series of issues.

"We need to speak out more about what those issues are, otherwise the dialogue is filled in by them."

The plain speaking demonstrated by Orr was evident in his monetary policy statement, which was praised for its improved clarity by economists, with BNZ head of research Stephen Toplis relieved not to have to "flounder through screeds of mumblings to find out what the bank really thinks."