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To find out whether our financial system has integrity, Transparency International New Zealand (TINZ) is developing an assessment methodology, the “2017 New Zealand Financial Integrity System Assessment” (FISA). View the initial draft assessment for consultation. In addition the attached Power Point further refines the questions in the assessment.
This 2017 New Zealand Finance Integrity System Assessment (FISA) is the first ever review of the integrity systems of any country's financial system. It covers New Zealand’s financial institutions along with their industry bodies, regulators, dispute resolution schemes and the payments and settlement system.
The FISA offers customers, citizens, communities, civil society organisations and businesses detailed knowledge of the way in which the financial system identifies and seeks to prevent corruption, reinforces core ethical values and strengthens integrity systems. Armed with this knowledge, citizens and customers can both identify good performance and push for improvement. At the same time, financial institutions can choose to set out clear priorities to develop their activities aimed at preventing corruption while seeking the additional returns that come when organisations adopt a pro-active role to promote their integrity.
Through these additional returns New Zealand financial institutions will be able to continuously innovate, upgrade their services and should engage with international capital markets to assist in minimising the risk premium inherent in interest rates for New Zealand household and business borrowers. Financial institutions know that public trust is important and that corruption scandals, collusion, anti-corruption behaviour and lack of transparency damage that trust.
The global financial crisis was a dramatic event that impacted strongly on economic and individual well-being – many financial institutions and organisations were found wanting. Yet afterwards, internationally, while there was change to their structures, many of the features that support unethical behaviour still exist. It may take the disruption of cybercurrency trading, peer-to-peer lending, crowd funding platforms and other technologies before the international system finally wakes up – and of course, it is also important to ensure these new electronic financial systems are built on strong integrity systems.
While internationally, reform in financial systems is still required, in New Zealand since the GFC, the financial sector as a whole has undertaken one of the most comprehensive changes in regulatory regime any sector has ever been subject to. It has involved significant investment to cover compliance costs and systems changes for market participants.
It should nevertheless be front-of-mind that the improved detail of New Zealand’s regulatory regime should not overshadow its purpose – commitment to the broad spirit and culture of ethical integrity will create the benefits, not the narrowest interpretation of the legal requirement. For market credibility and confidence, upfront transparency and displayed integrity are important.
This initiative, then, is one where yet again New Zealand is in a position to show the way forward.
The assessment of 63 detailed questions on all aspects of the financial system is designed to gain an objective and independent view of whether the New Zealand financial system is in fact trustworthy.
Armed with this knowledge, citizens and customers can both identify good performance and push for more effective service and product delivery.
FISA aims to evaluate whether financial organisations demonstrate an effective approach for managing the prevention of corruption. There’s more – the evaluation is also concerned about the resources available to continue to successfully combat corruption. So, there is also an evaluation of whether organisations adopt a proactive role for realising the benefits of their integrity.
Real reform in banking and financial systems isn’t even on the radar in most countries. In contrast, the New Zealand financial sector as a whole has undertaken one of the most comprehensive changes in regulatory regime of any other local industry sector and any other country’s international financial sector.
And so it is that TINZ is putting its draft FISA out for consultation. Everyone is encouraged to take a look at the draft assessment (request by using the side panel) and provide feedback. The knowledge about the features of an ethical banking system gained during the consultation is an important basis to then understand the findings of the assessment when they are published in the second half of next year.