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Kiwibank breaches RBNZ bank registration rule
By Gareth Vaughan
Kiwibank says it has been in breach of one of the conditions of its bank registration for more than two months and the Reserve Bank is considering taking action.
Kiwibank's latest General Disclosure Statement, out yesterday, notes since the resignation of Grant Paterson as a director on June 18 due to poor health, it hasn't complied with the condition that requires at least half its board to be independent of parent NZ Post.
"This non-compliance will be rectified with the appointment of a new independent director, a process for which is underway," Kiwibank says.
However it also notes that: "The Reserve Bank were notified immediately and are considering whether they will take any action against the Bank."
Under the Reserve Bank of New Zealand Act 1989, a fine of up to $1 million for non-compliance with registration conditions is possible. A Reserve Bank spokeswoman declined to comment on the Kiwibank case.
A Kiwibank spokesman told interest.co.nz the bank hoped to finalise the appointment of a new independent director shortly. He said given all appointments are subject to Reserve Bank checks and the regulator confirming it has no objection, it’s not possible to make a temporary appointment.
"The Reserve Bank has been kept fully informed throughout and understands why the situation has arisen. At this stage, the Reserve Bank has not indicated whether it considers it necessary to take any action in relation to the technical breach of our conditions of registration that has occurred," the Kiwibank spokesman added.
Finance companies prosecuted
Over recent months the Reserve Bank has prosecuted two finance companies for not having the two independent directors required of them under their non-bank deposit taker regulations.
In the first case Avanti Finance pleaded guilty and was fined $15,000 by Judge Emma Aitken in the Auckland District Court and ordered to pay costs of $132.89.
In the second case Broadlands Finance has also pleaded guilty. Broadlands faces a fine of up to $35,000. The maximum potential penalty for the finance companies was also a $1 million fine.
Kiwibank's board includes chairman Rob Morrison, plus fellow independent directors Alison Gerry, the former Lion Nathan treasurer, and Catherine Savage who is ex-managing director of AMP Capital Investors.
Other directors are former Finance Minister Michael Cullen who is chairman of NZ Post, NZ Post CEO Brian Roche, plus Murray Gribben and David Willis, who are both also NZ Post directors.
Announcing Avanti's fine last December Reserve Bank Deputy Governor Grant Spencer said sound governance was a key aspect of the non-bank deposit taking regulatory regime.
"The requirement to have two independent directors is pivotal in strengthening this sector and avoiding the issues experienced by some finance companies in recent years. As a result, it is important that non-bank deposit takers are aware of their directors’ interests, to ensure they meet the Reserve Bank requirements to have two independent directors on their boards," said Spencer.
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