"Over the last 10 or 15 years particularly the RBNZ has operated on the basis of a presumption of mistrust of what the Australian authorities might do in a financial crisis involving Australian institutions in New Zealand," explains Geoff Mortlock.Mortlock worked at the Kiwi central bank for over two decades, and for five years at APRA, where he led the Aussie regulator's policy work around bank crisis resolution rules. He now works as an independent consultant for the likes of the IMF, the World Bank and KPMG, focusing on similar issues. Mortlock says he believes the RBNZ"s mistrust in their Aussie counterparts is "largely misplaced and ill-judged"."It has led to an excessively cautious and costly approach to capital and to ring-fencing [of local assets] and to the RBNZ's approach to regulation broadly."William Curtayne, deputy head of Australian investments at Kiwi firm Milford Asset Management, doesn't reckon there is an "anti-Aussie business" vibe going on in his home country right now.
That said, the now Sydney-based Curtayne does admit the standard whinging around rapacious banks and their high fees takes on an extra frisson when pretty much every one of said banks has its ultimate headquarters across the Tasman.Just how dominant are Australian interests? The fact that our Big Four write almost $9 of every $10 lent in New Zealand tells the story. Local investors are forever hopeful of a local bank listing on the Kiwi exchange, but those hopes have been consistently dashed.You can imagine, then, that cracking down on banks and, this week, an AMP life insurance business is unlikely to elicit much of a protest from the New Zealand populace.You could say that the Aussies have effectively colonised their near neighbour's financial sector and left Kiwi regulators stuck with kowtowing to APRA's edicts around prudential rules and regulations.This is not a position that sits well with RBNZ governor Adrian Orr, who by all accounts is a pugnacious figure with nationalistic sensibilities.
Orr was appointed in March 2018, only a month after the collapse of New Zealand's CBL Insurance. That failure spurred some bad press and an independent review, the findings of which were only released on July 3.In accepting all of the report's findings, deputy governor Geoff Bascand said the central bank's "approach to prudential regulation and supervision is being updated to promote financial stability for future generations"."We are reviewing key regulatory requirements to boost the resilience of our banking and insurance sectors, and we are intensifying our supervision of financial institutions," Bascand continued.
"In short, we are recalibrating the rules and our enforcement of them."Bascand's line around "financial stability for future generations" is key to understanding what is a "massive secular theme" happening in New Zealand, economist Cameron Bagrie says, in which authorities and policymakers are shifting their focus to "the long game".This theme is happening across multiple levels, whether it be issues of intergenerational equity around housing affordability, the Kiwi Treasurer's "well-being budget" or a focus on climate change policies."I don't believe there is an anti-Aussie business feeling," Bagrie says."What's happening is the New Zealand regulator is focused on having more capital under their control, and it just so happens that a lot of those businesses are owned by Australians. "The financial services industry shouldn't feel special here in getting singled out."
AMP Price at posting:
$1.81 Sentiment: None Disclosure: Held
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