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Reserve Bank New Enforcement Department 

by Jane Standage

Published: April, 2021

Submission: April, 2021

 



The Reserve Bank Te Putea Matua has established a new separate Enforcement Department.  The Department will be operationally separate from the Supervision team but both will work together to incentivise and manage prudent behaviour and to hold institutions to account for non-compliance.


Who needs to read it? Why?


All financial institutions regulated by the Reserve Bank. This signals a move towards a more proactive regulator to which institutions will need to respond.


What will the Enforcement Department’s remit be?


The Bank says the Enforcement Department will be working to ensure financial institutions remain sound and operate with appropriate conduct and culture.  The Bank notes that it has a low risk appetite for events that materially damage the financial system.


The Department will work closely with the different Supervision teams across the range of regulated entities in the banking, insurance and AML/CFT sectors in tracking compliance breaches and applying an escalated response to serious failures.


The Enforcement Department is intended to establish a new transparent and public framework for enforcement with leading edge tools and technology.  In addition, it will establish a new Enforcement Committee which will oversee enforcement actions for serious or repeat breaches of regulatory requirements.


The Department is led by Ben Carruthers who joined the Bank in 2020 as a Senior Adviser. Prior to that, he worked for 12 years at the Australian Prudential Regulation Authority, most recently as Senior Manager of the Litigation team.


Our view


This marks a new chapter in the Reserve Bank’s role, with it moving to take a more intensive supervisory and enforcement approach.  We expect the new Department will work closely with other regulators such as the FMA and the Commerce Commission in the course of their work.


We expect to see a new Deposit Takers Bill in due course which will impose a new single regulatory regime for non-bank deposit takers and banks and will broaden the Bank’s supervision and enforcement tools (including the power to conduct on site inspections). The new Enforcement Department will, we expect, be gearing up for this new regime.


The Reserve Bank is also involved in a joint review with Treasury of the Reserve Bank’s enforcement powers, as part of the Reserve Bank Act review.


 



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