FOUR FAST FACTS on RBNZ'S enforcement framework

FOUR FAST FACTS

ON: RBNZ’S ENFORCEMENT

FRAMEWORK

1

Background

The Reserve Bank of New Zealand –Te Pūtea Matua (RBNZ) established its own Enforcement Department in March 2021. The RBNZ has developed an Enforcement Framework to promote confidence and consistency in its decision-making and actions towards its regulated entities (including banks, NBDTs, insurers and FMIs). Completed this year, the Framework consists of the following public documents:

 Enforcement Principles and Criteria Guidelines;

 Enforcement Guidelines; and

 Investigation Guidelines.

2

Enforcement Guidelines

The RBNZ must act in a risk-based, proportionate and transparent manner (its Enforcement Principles) with consideration of the seriousness of conduct, responsiveness, public trust and confidence, and efficacy (Enforcement Criteria). The Enforcement Guidelines explain how RBNZ will apply the Enforcement Principles and Criteria when deciding its regulatory response. The RBNZ’s tool kit includes:

 Normal Supervision: aligns with RBNZ’s general supervisory approach - for minor or isolated non-compliance;

 Heightened Supervision: a proactive increase in the intensity of supervision - for repetitive or more serious non-compliance;

 Targeted response: RBNZ takes formal actions – for prevalent or serious non-compliance; and

 Court response: civil or criminal actions – for serious, repetitive, systematic non-compliance which may cause serious harm.

Investigation Guidelines

3

Enforcement action

The Investigation Guidelines describe RBNZ’s approach to investigations – how matters are referred to enforcement, the investigation process, and the information gathering methods available to RBNZ. It is a low bar for matters to be referred to the enforcement function – any compliance issue that has the potential to justify an enforcement response. The RBNZ then has significant powers of investigation, including search warrants, formal notices, and compulsory interviews. Before responding to information requests, we recommend taking time to understand the formal statutory powers under which the request is made (where relevant) and to discuss the scope and timing of your response. Particular care and preparation is required before deciding to attend interviews, which are voluntary and may be used in evidence against the individual, regulated entities or others.

4

RBNZ has embarked on a new chapter as it strengthens its enforcement function, and adopts a more structured framework to investigate and respond to non-compliance. Between March 2021 and March 2023, 11 matters had been referred to the Enforcement Team – involving banks and other regulated entities, and entities not licensed by the RBNZ but suspected of breaching legislation for which RBNZ is responsible. Some of these investigations have resulted in formal warnings, and others with supervisory responses. We expect to see an increase in investigations and enforcement responses for non-compliance as the Enforcement Department matures, and particularly if the Deposit Takers Bill becomes law this year, as it expands the Enforcement Department’s toolkit.