As we know, the superb RBNZ has fully integrated monetary and macroprudential policy tools, a creative leadership and national interest values. This enables 300 staff to conduct all of the functions that Australia’s combined monetary regulators fail to do with 1,400. It uses big and dumb rules to govern financial stability, the cash rate when needed and macroprudential to suppress capital misallocation. All from a single, accountable cockpit.
It is the open working model for what Australia should be. But that makes it unAustralian apparently, via the AFR:
AMP’s stock price plummeted on Monday after the company announced that the Kiwi regulator had effectively sunk the sale of its life insurance business.
This was the latest strong-armed regulatory intervention which has already left Australian banks facing a $19 billion capital call after the RBNZ announced the lender’s highest-quality capital ratios would have to lift to at least 16 per cent, from a previous minimum of 8.5 per cent.
It’s hard to escape the feeling that all these actions are tinged with an anti-Australian sentiment. That feeling is not totally misplaced.
“Over the last 10 or 15 years particularly the RBNZ has operated on the basis of a presumption of mistrust of what the Australian authorities might do in a financial crisis involving Australian institutions in New Zealand,” explains Geoff Mortlock.
Chanticleer goes the big whinge as well:
AMP Life has been treated as a branch office in New Zealand for 154 years. This gave the business a carve-out from the country’s capital rules for life insurance.
Essentially, it meant the RBNZ was happy to cede the regulation of AMP Life to the Australian Prudential Regulation Authority. Now, it no longer trusts APRA.
…It makes no sense whatsoever for shareholders and policyholders of AMP to be told about a change in a 150-year-old regulatory practice for life insurance companies in New Zealand through an out-of-the-blue ASX announcement.
…How does this share price collapse, which reflects a loss of confidence in AMP, help financial stability in Australia? Whatever happened to appropriate consultation between co-operative regulators with a mutual interest in financial stability?
Obviously the sale triggered the need for the RBNZ to respond. The fissures of distrust are not new, they’re simply being exposed by vicissitudes.
And why wouldn’t the RBNZ be skeptical? AMP chairman David Murray was fresh from conducting a review into Australian regulation (in which he did a good job) when he took the top job at Australia’s most disgraced money manager. This is classic revolving door capture.
Murray also led the backlash against the Hayne Royal Commission, making himself the walking embodiment of the trail of regulatory failure outlined in the HRC.
Moreover, no reform or accountability to our own hopelessly broken monetary regulators came out of the HRC.
The RBNZ would be stark raving mad to trust Australian banks, the RBA and APRA after that. It is doing exactly the right thing it protecting the NZ economy from the rapacious financial system, fully captured regulators and corrupt government next door.
RBNZ integrity is a litmus test of Australian monetary failure not some foreign wrecker with a vendetta.