Transparency Times March 2017

2017 New Zealand Financial Integrity System Assessment

Deadline for wider formative consultation extended to 19 April 2017

Transparency International New Zealand’s (TINZ) 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 the Reserve Bank of New Zealand (RBNZ), the Financial Markets Authority (FMA), the Commerce Commission, the Department of Internal Affairs (DIA), Trustee Corporations, the Ministry of Business Innovation and Employment (MBIE), the Banking Ombudsman, the Insurance and Financial Services Ombudsman, Financial Services Complaints Limited and Financial Disputes Limited, registered banks, non-bank deposit-takers, co-operatives, KiwiSaver providers, and the payments system.

The financial system has an impact on all New Zealanders. Amongst other things, financial services organisations such as registered banks, financial services and money co-ops, play a key role in looking after your deposits. TINZ has had focused comments from those organisations that will be assessed. It wants to hear from those who use the financial system to be sure that the questions being assessed reflect how public trust in the system is maintained.

View the draft assessment for consultation as of 6 February 2017. Please sign up to participate in the consultation by completing the form on the right. Alternatively download the FISA survey document file and return it to fisa@tinz.org.nz with tracked changes.

TINZ’s formative consultation is underway on the form of its proposed survey on the integrity of the financial system, namely the 2017 New Zealand Financial Integrity System Assessment (FISA). The aim is to integrate feedback from readers and others by the end of April into a final assessment package. Then, a survey of all the individual financial organisations that make up the financial system is planned. With the extension of the consultation phase, it will commence from 1 July 2017.

The assessment of the finance system as a whole begins 1 August 2017.

FISA is intended to offer customers, citizens, communities, civil society organisations and businesses detailed information about the way in which the financial system prevents corruption, reinforces core ethical values and strengthens integrity systems. Equipped 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 engage with international capital markets to bring down development-capital interest rates for New Zealand household and business borrowers. Financial institutions know that public trust is important and that corruption scandals, collusion, corrupt behaviour and a 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 crypto-currency trading, peer-to-peer lending, crowd funding platforms and other technologies before the international system finally wakes up. Of course, it is also important to ensure these new electronic financial systems are built on strong integrity principles.

The FISA formative consultation is in the spirit of demonstrating how consultation can work when people are given the time to provide feedback while the approach is being developed. Two work-in-progress consultation drafts have been distributed to the TINZ database – one in November 2016 and an updated version in February. The first page of the latter sets out specific questions to help shape your feedback. DO TAKE A MOMENT NOW TO DOWNLOAD A COPY AND PROVIDE FEEDBACK. You are welcome to comment in detail by sending back a word version of the draft with tracked changes. Even single comments about what is good and what could be better for financial system integrity provide useful insights.

Note too that the focus of the assessment is the prevention of bribery and corruption in the financial system through an ethical, values-based culture (the integrity system) and then realising the benefits through process and strategic direction.

This initiative is one where yet again, New Zealand is in a position to show the way forward. Its position will be stronger the greater the engagement of our readers in shaping the assessment approach.

Message from the CEO

Janine McGruddy

Janine McGruddy
TINZ Chief Executive Officer

by Janine McGruddy

TINZ Chief Executive Officer

Kia ora koutou TINZ Members

I am very fortunate in my role as TINZ CEO to spend a lot of time working with a variety of organisations, from universities and other civil society organisations to government departments, unions and international entities. I have learned that it takes real effort, mutual respect, and good will on both sides to reach agreed understandings about how best to make progress on issues that are of great importance to all of us. We are all different, but that is what makes the collaboration stronger and more likely to last.

Unity amongst integrity stakeholders is the key to getting beyond differences of opinion or other areas of focus. In the current global political climate, it is essential as leaders that we put aside our minor differences, and unite around what we can achieve together.

Sadly, there are those out there that claim to want these things, but use every opportunity to knock the very organisations that have the most in common with the issues or values they claim to espouse. Some have even suggested that this is their goal. They deliberately divide and conquer as a perverse way to gain more glory or recognition for themselves.

And, as always, the best way to deal with that behaviour is to ignore it and to continue to put your energy into what you know can make a real difference, not just make headlines. There is a very real deep satisfaction from making connections and developing affiliations with like-minded people. Everybody wins from the fresh perspective and energy that arises from trust and willingness to work to find solutions to the problems we face as a planet.

We know that it can feel great to stand on the side lines and cast stones at those that do not meet our lofty standards – nothing better than thinking you are right and they are wrong. But that does not produce the outcomes that are needed. It is much better to use those stones to build paths and to help each other understand better ways of doing things and knowledge of the real issues the other faces.

He rangi tâ matawhâiti, he rangi tâ matawânui. A person with narrow vision has a restricted horizon; a person with wide vision has plentiful opportunities.

Ngâ mihi

Janine

2017 New Zealand Financial Integrity System Assessment

Deadline for wider formative consultation extended to 19 April 2017

Transparency International New Zealand’s (TINZ) 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 the Reserve Bank of New Zealand (RBNZ), the Financial Markets Authority (FMA), the Commerce Commission, the Department of Internal Affairs (DIA), Trustee Corporations, the Ministry of Business Innovation and Employment (MBIE), the Banking Ombudsman, the Insurance and Financial Services Ombudsman, Financial Services Complaints Limited and Financial Disputes Limited, registered banks, non-bank deposit-takers, co-operatives, KiwiSaver providers, and the payments system.

The financial system has an impact on all New Zealanders. Amongst other things, financial services organisations such as registered banks, financial services and money co-ops, play a key role in looking after your deposits. TINZ has had focused comments from those organisations that will be assessed. It wants to hear from those who use the financial system to be sure that the questions being assessed reflect how public trust in the system is maintained.

View the draft assessment for consultation as of 6 February 2017. Please sign up to participate in the consultation by completing the form on the right. Alternatively download the FISA survey document file and return it to fisa@tinz.org.nz with tracked changes.

TINZ’s formative consultation is underway on the form of its proposed survey on the integrity of the financial system, namely the 2017 New Zealand Financial Integrity System Assessment (FISA). The aim is to integrate feedback from readers and others by the end of April into a final assessment package. Then, a survey of all the individual financial organisations that make up the financial system is planned. With the extension of the consultation phase, it will commence from 1 July 2017.

The assessment of the finance system as a whole begins 1 August 2017.

FISA is intended to offer customers, citizens, communities, civil society organisations and businesses detailed information about the way in which the financial system prevents corruption, reinforces core ethical values and strengthens integrity systems. Equipped 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 engage with international capital markets to bring down development-capital interest rates for New Zealand household and business borrowers. Financial institutions know that public trust is important and that corruption scandals, collusion, corrupt behaviour and a 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 crypto-currency trading, peer-to-peer lending, crowd funding platforms and other technologies before the international system finally wakes up. Of course, it is also important to ensure these new electronic financial systems are built on strong integrity principles.

The FISA formative consultation is in the spirit of demonstrating how consultation can work when people are given the time to provide feedback while the approach is being developed. Two work-in-progress consultation drafts have been distributed to the TINZ database – one in November 2016 and an updated version in February. The first page of the latter sets out specific questions to help shape your feedback. DO TAKE A MOMENT NOW TO DOWNLOAD A COPY AND PROVIDE FEEDBACK. You are welcome to comment in detail by sending back a word version of the draft with tracked changes. Even single comments about what is good and what could be better for financial system integrity provide useful insights.

Note too that the focus of the assessment is the prevention of bribery and corruption in the financial system through an ethical, values-based culture (the integrity system) and then realising the benefits through process and strategic direction.

This initiative is one where yet again, New Zealand is in a position to show the way forward. Its position will be stronger the greater the engagement of our readers in shaping the assessment approach.

NZ banking and finance services

Brendon Wilson

by Brendon Wilson

TINZ Director

Writing for Employers and Manufacturers Association

BusinessPlus Magazine

By world standards, New Zealand’s banking and financial sector is small. Even so, the sector aims to be accessible to its retail and business clients. Australian and New Zealand banks have good credit ratings. The value of these were demonstrated as they came through the global financial crisis better than counterparts in most parts of the world.

It is important for New Zealand’s banking and finance sector to be resilient, efficient and innovative to enable business growth, export expansion, access to capital for investment in plant and innovative product development. Debt finance plays a pivotal role for NZ companies in meeting their customer expectations and facing the world’s competitive innovators.

So how can our banking and finance sector improve and show its responsiveness to the needs of New Zealand business?

As a New Zealand business, do you identify with some of these typical issues?

  1. Your earnings just cover your costs, with seasonal patches when they don’t
  2. You work long hours
  3. Your business’s tax regime is overly complex and compliance costs are high
  4. Health and safety requirements have recently become more demanding
  5. You receive next to no interest on your deposits
  6. You have to meet banks' timeframes for deposits – e.g. your biggest sales may be on week-ends when banks aren't open, so your deposits often can’t be made in time to cover outgoings
  7. When you borrow for expansion or working capital, your interest rates are 3-5 % above liber, meaning your competitors may be paying considerably less for their debt – even if your business is local, you are exposed to offshore competition and costs‎
  8. To borrow at all, banks require tangible, often personal assets, which means many mortgage their homes to acquire business capital – a serious disincentive to opportunity, growth and innovation, adding personal risk.

Transparency International New Zealand (TINZ) is undertaking a consultation process to design an assessment of the New Zealand financial sector’s current performance. Independent (not TINZ) professional assessors will work with banks and financial institutions to establish their real responsiveness and whether regulation is playing a suitable role. TINZ Financial Integrity System Assessment (FISA) aims to objectively assess our financial system’s approach to building trust with its customers.

The IMF reports that despite the GFC, only around 2% of the world's banks have changed the way they do business, including the strengthening of their governance and integrity systems to reduce risk, and preventive measures against bribery and corruption. Many of the features that support unethical, risky, costly financial behaviours still exist. TINZ’s FISA assessment aims to discover whether New Zealand banks and financial service providers are different, and in what areas.

Assessed, proven transparency, accountability, strong integrity systems and core ethical values will illuminate the qualities of our B&F services and will enable lowering costs of corruption risk and poor practice, and the risk margins they carry.

Given the importance of reputation to New Zealand business, are risks to economic growth being lessened through our financial system, or are risks adding costs to all our operations that stymie innovation, opportunity and growth?

TINZ has designed the FISA to give an independently-assessed, professional, objective overview of how well the New Zealand financial sector’s meets expectations and requirements, and will result in the development of initiatives and tools to reinforce a culture of integrity and realise greater benefits for business.

As the New Zealand economy continues to grow and become engaged with new patterns of business and new global partners, it increasingly needs to build relationships with and within countries with differing standards. For prudential purposes, the New Zealand financial sector needs to monitor risks that are associated with this diversity of business relationships.

The recently-announced sale of UDC Finance by ANZ to Chinese interests reminds us of the openness of New Zealand's financial organisations to global economics. It is important that we are open to world competitive capital and services, but it is important that all those providing financial services to New Zealand businesses are aware of what it takes to meet customer and integrity expectations here, and demonstrate how they design their processes to meet them. This contributes further to New Zealand’s reputation.

The assessment (FISA) examines the extent to which the financial system meets and adds to our reputation, and harvests for clients and our economy the benefits of a strong reputation.

It may take the disruption of cyber-currency trading, peer-to-peer lending, crowd funding platforms and other technologies before the international financial system finally recognises that change is needed to maintain the public's and business’s trust. It will also be important to ensure these new mould-breaking financial innovations are built on strong integrity systems, and meet our needs and expectations in open visible ways.

The progress of TINZ’s FISA assessment will feature in future articles [to the EMA].

We encourage you to look at the current FISA draft assessment, and let us know your thoughts. Click here View the latest draft assessment for consultation.

The Government’s role in protecting New Zealand’s important information

Andrew Hampton Director of the Government Communications Security Bureau

Andrew Hampton

Andrew Hampton, Director of the Government Communications Security Bureau (GCSB), spoke to Transparency International New Zealand’s February Board meeting.

He spoke about the role of Government in protecting New Zealand’s important information. In his conclusion he outlined his priorities listed below.

  • Implementation of the new legislation which is currently going through Parliament.
  • Continuing to build public trust and confidence – being more open and accessible through engagements like this is one of the factors which can contribute to this.
  • Increasing the Bureau’s effectiveness by working better with others, both internally and externally.
  • Involving the customers of our cyber security, information assurance and intelligence products more in how we design, deliver and evaluate services.
  • Developing our people and their capabilities – with additional investment from Government comes the need to grow our people, both in number and building their capabilities. This also creates opportunities broaden the diversity of our staff so we can better reflect the community we serve and bringing a greater range of perspectives to our decision-making.

Notes from the complete speech are available from our website.

Common reporting standard

Very quietly, IRD is implementing a Common Reporting Standard devised by the Organization for Economic Cooperation and Development (OECD). The new code aims to ensure automatic information sharing between tax authorities globally.

The Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act received Royal assent on 21 February 2017. The Bill was introduced in August 2016, reported back to Parliament by the Finance and Expenditure Select Committee in November 2016 and completed its third reading on 14 February 2017.

New Zealand is one of more than 100 countries implementing a Common Reporting Standard (CRS) devised by the OECD. The new code aims to ensure automatic information sharing between tax authorities globally.

While the new trust register is not covered by CRS protocols, Prime Minister Bill English’s Government has made clear, in notes accompanying its legislation, that it intends to share details to other jurisdictions “as a matter of course.”

Transparency International publishes Asia Pacific corruption poll

Many governments in Asia Pacific fail to stop corruption;
900 million people are paying bribes

From the media release, “Approximately 900 million — or just over one in four — people living in 16 countries in Asia Pacific, including some of its biggest economies, are estimated to have paid a bribe to access public services, according to a new public opinion poll from the anti-corruption movement Transparency International.”

While we have participated in the past, New Zealand was not included in the 2016 survey.

TI Global Corruption Poll: see Asia Pacific corruption poll 2016 media release and Asia Pacific corruption poll report

Institute of Directors announces new Chief Executive

IIANZ Board member and Chair of its Advocacy Committee

Kirsten Patterson
New Institute of Directors Chief Executive

The Institute of Directors in New Zealand (IoD) has appointed of Kirsten Patterson as its new Chief Executive.

Ms Patterson is currently the Country Head of Chartered Accountants Australia and New Zealand. Ms Patterson, a qualified lawyer and Fellow of the Human Resources Institute of New Zealand, brings extensive governance and leadership experience, alongside advocacy on diversity issues.

“Good governance makes a difference to our businesses, our economy, and through to our communities. In these globally uncertain and changing times, strong governance and leadership is needed now more than ever. The IoD has a significant role to play in ensuring the New Zealand governance community is ready for the challenges ahead and that their voice is heard in the policy debates impacting New Zealand.” according to Ms Patterson in the IoD announcement of her appointment.

The full announcement is available at the IoD website.