TSB CEO Kerry Boielle says a 'disproportionate' regulatory workload is stifling innovation by smaller banks

TSB Bank is calling for 'proportionality' in banking sector regulation, saying the heavy workload of recent years is draining small banks' resources.

"Good regulation is critical for a well-functioning, robust financial system. However, we're currently being hamstrung by the huge compliance workload, which takes our time and investment away from innovation," CEO Kerry Boielle told Interest.co.nz.

The NZ Banking Association's April Regulatory Radar paints the picture.

In the last few years banks have had to submit on and comply, or plan to comply, with the Financial Markets (Conduct of Institutions) Act, an AML/CFT Amendment Bill, the Customer and Product Data Act, the Deposit Takers Act, an RBNZ Capital Review, joint banking competition studies by the Commerce Commission and Parliament's Finance and Expenditure Select Committee, reform of the Credit Contracts and Consumer Finance Act, the climate-related disclosures regime, the RBNZ's Future of Money study, and DIA's Digital Identity Trust Framework.

"The regulatory changes we’ve seen in recent years have imposed significant cost and complexity," Boielle says.

"As well as the scale of regulation, we also find regulation is currently set with the major banks in mind.

"This means NZ-owned banks like TSB have to comply with the same regulations, despite being simpler and having far less systemic risk, as well as being smaller scale businesses to fund and implement the work."

TSB has only 600 employees, she says, while the Big Four banks have 5,000 to 8,000, "so they have around ten times more people to implement the same regulations we do, parent company expertise to call on, and a bigger base to spread the costs over."

TSB had total assets at 31 March of $9.6 billion, compared with $125-133 billion for ASB, BNZ and Westpac, and $201 billion for ANZ.

Boielle says there are several areas where simpler, more proportionate regulation could be applied to smaller banks like TSB, while still ensuring the integrity of the banking system.

"Some straightforward solutions, such as staggering start dates for new legislation to give the smaller banks more time to get compliant and do it more effectively for customers, better coordinating and sequencing legislative change across regulators, and introducing standardised reporting frameworks across regulators, would have immense value for banks like TSB."

The bank is calling on policymakers to make changes to address the increasing regulatory burden in banking and introduce true proportionality, "so New Zealand-owned banks like TSB can invest more rapidly in the products and services our customers need.

"This would result in more competition for the benefit of all New Zealanders."

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