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Banks and insurers will face more scrutiny from the central bank as part of a "more intensive supervisory approach", Bascand warned in a speech this week.
Bascand expects the central bank to continue with thematic reviews across the financial system. At the Financial Markets Law Conference in Auckland, Bascand promised a review into the use of actuaries in the insurance sector, as the RBNZ takes aim at new targets.
"In the near future there will be a thematic review on banks’ liquidity standards and another on the appointed actuary regime in the insurance sector," he said. "We will continue to periodically stress test the banking system."
It comes as the RBNZ commences a review into insurance legislation and solvency standards.
The deputy governor gave a clear indication that the RBNZ will take firmer line on corporate misconduct and individual accountability.
"We will be more pro-active in holding directors and managers to account, particularly in areas where we have already identified shortcomings," Bascand told conference delegates.
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1. What are the problems these reviews are designed to solve?
2. Re (Life & health) Insurers solvency - I know the hypothesis of the MJW insurance report paid for by FSC and its members was that insurance companies paid too much commission and their solvency was at risk. But since then partners and Fidelity both had new investments by presumably intelligent investors (Blackstone and NZ Super Fund) which showed those investors certainly didn't think those companies at least were insolvent). Where are the signs that a life/health insurer might be suspect.
3. In the banking world. half a dozen unelected and almost unaccountable people have made a risk assessment for all of us that our community risk tolerance is as low as the 1 in 200 year event (on a standard normal distribution i think that's about 2.6 standard deviations from the mean when mean is 0 and std dev = 1). That's extreme risk aversion - but playing by those rules means banks have to hold more capital and interest rates paid by the bank will be lower and interest rate paid by borrowers to the bank). Where is any cost benefit assessment of such a policy setting.
Dare I suggest that if there is a 2.6 sigma event affecting a bank, there might be a lot of other problems.