Feature
Reserve Bank invites views on its proposed new enforcement principles Andrew Horne - partner, Minter Ellison Rudd Watts
T
he Reserve Bank of New Zealand – Te Pūtea Matua is seeking views on its proposed enforcement principles and criteria. The proposed enforcement principles will guide the activities of the Reserve Bank’s new Enforcement Department. They are intended to assist in the development of an enforcement framework to achieve its compliance goals, increase the effectiveness of its enforcement actions and promote confidence and consistency in its enforcement decision making.
Who needs to read it and consider making a submission? The consultation is a must read for registered banks, licensed nonbank deposit takers and insurers, which are subject to the Reserve Bank’s enforcement powers. But other financial sector participants should also take an interest in the Reserve Bank’s intended exercise of its regulatory powers, as it may influence the other regulators. The Reserve Bank exercises its enforcement powers under a number of statutes that govern the financial sector. They are the Anti-Money Laundering and 14
December 2021
Countering Financing of Terrorism Act 2009, Reserve Bank of New Zealand Act 1989 (to be replaced in July 2022, when the 2021 Act of the same name and a new Deposit Takers Act come into force), Insurance (Prudential Supervision) Act 2010, Non-bank Deposit Takers Act 2013 and Financial Markets Infrastructures Act 2021. What are the proposals?
The Reserve Bank says that its enforcement framework will be tied to three compliance goals:
• incentivise and monitor prudent behaviour;
• promote confidence in compliance; and
• enforce compliance by holding institutions to account for non-compliance.
In addition, the Reserve Bank has formulated three enforcement principles and four criteria. These are all high-level, as they are intended to apply across all the areas that the Reserve Bank regulates.
• The three enforcement principles are high-level ideals that guide its enforcement strategy: they are to be risk-based,
proportionate and transparent.
• The four criteria are specific considerations for use when deciding on the appropriate enforcement response in each case. They are seriousness of conduct, responsiveness, public trust and confidence and efficacy.
The Reserve Bank says that it has considered similar approaches taken by other regulators, both in New Zealand and overseas. Unsurprisingly, these include the Financial Markets Authority and the Commerce Commission together with the Australian and English prudential regulators. The Singaporean regulatory approach has also been considered. What do these enforcement principles mean in practice?
The Reserve Bank offers the following examples of how these high-level ideas are intended to guide the way in which it approaches enforcement in particular cases: Risk-based principle: The Reserve Bank will focus its efforts and its enforcement resources to address conduct in relation to issues that could
