I was following up something this afternoon, and noticed that the Reserve Bank had posted an OIA response to someone inquiring about gifts accepted by staff.
There is almost two years of data, and the overall list isn’t that long. I’ve been the recipient of all sorts of, mostly small, things over the years – often from visiting central bankers or the like, but including the odd corporate box invite, dinners, and so on. If anything, I’m a little surprised the Reserve Bank’s list isn’t longer – in my days in the Financial Markets Department, corporate hospitality was part of relationship management, particular for our dealers. The Bank must have tightened up: there is a surprisingly small number of cases of financial markets staff accepting hospitality etc.
But one element of the list really did catch my eye. The Reserve Bank supervises banks, non-bank deposit-takers, and insurers: in doing so, it can have a big influence on the businesss of those institutions. So one of the things that is very important is that the Reserve Bank’s supervisory staff keep a suitable distance from the institutions they are regulating.
On the gifts list, three banks operating in New Zealand showed up. The first was BNZ, offering hospitality (twice) to Mark Perry, the Reserve Bank head of financial markets (and a former BNZ employee). Mark won’t be involved in the supervisory or regulatory side of things. The second was Bank Baroda, which presented a couple of books, which were passed on to the Reserve Bank library.
The bank that showed up most was ICBC. It showed up seven times, on each occasion offering gifts to people with a direct involvement in bank regulation. These ranged from a wall-hanging presented to the Governor by the bank chairman from China (not kept personally by the Governor), through to a box of food, cheese boards given to four staff, three note pads and a wireless mouse, a mobile power pack (again not kept by the individual) at the end of a supervisory meeting, and another wall-hanging presented to the Deputy Governor (not kept by him personally) by “ICBC Mr Wang Lin, Secretary of Party Discipline Committee”.
There was also another gift, accepted by the relevant staff, from a foreign bank at a meeting to discuss a possible application for bank registration.
I am not, repeat not, suggesting that any Reserve Bank official will have directly changed their stance on any matter to do with ICBC because of these fairly small gifts. But appearances matter, and so does substance. It is simply inappropriate for Reserve Bank staff to be accepting gifts from banks they regulate, no matter how small those gifts are. Taken together such small gifts can foster an atmosphere that makes the regulator a little less willing to ask hard questions, or to confront problems, than they might need to be.
The Reserve Bank’s rules need to be tightened up and the banks concerned need to be reminded – in the Governor’s words – that these are New Zealand registered banks, no matter which country the bank concerned’s shareholders and owners happen to be based in. Regulators simply shouldn’t be taking gifts from the regulated, not even as a matter of “courtesy”.