This short post is mainly for those readers who don’t follow me on Twitter.
You may recall that a couple of months ago I highlighted as being highly inappropriate the appointment to the new board of the Reserve Bank (and the establishment “transitional board”) of Rodger Finlay, who was also chair of the state-owned enterprise New Zealand Post, which in turn was the majority owner of Kiwibank, the 5th largest bank in New Zealand.
The appointment was not illegal – itself a serious weakness in the new Act – but was clearly highly inappropriate in that the new Board was picking up responsibility for prudential supervision, most notably of banks.
When a couple of journalists got interested in the story, we were given to understand that Finlay’s term as chair of NZ Post would expire on 30 June 2022, and as the new Board only took legal responsibility for the Reserve Bank from 1 July 2022, that seemed to allay at least some concerns (about the situation looking ahead), even though it was clear that Finlay had been fully and extensively engaged with the activities of the Bank and the old Board during his “transition board” term, while serving as chair of Kiwibank’s majority owner,
Later that month, the rest of the appointees of the new Board were finally announced. It was a seriously underwhelming group of people, few of whom came anywhere near the sort of standard one should expect on the board charged with such considerable powers, including around the appointment and review of the Monetary Policy Committee. I lodged various Official Information Act requests for background material on the Board appointments, and this morning got back a (long) response from the Minister of Finance.
There might be a fuller post at a later date, but skimming through the documents, this succession of tweets (typos and all) captured the initial concerning aspects I spotted.
The key concern, at least to my mind, is that the papers make it clear that it was always intended that Finlay would continue serving as NZ Post chair (owner of Kiwibank) even once the new RB Board, on which he was serving making regulatory policy, took formal office, and that those who asked about this appear to have been actively misled.
It is concerning that this conflict was never drawn to the attention of Cabinet members considering the appointment, but that process failure itself appears to be primarily a reflection of the deeper problem that neither The Treasury nor the Reserve Bank appear to have considered the conflict to have mattered, either substantively or in appearance terms. There is text in the OIA release suggesting that Treasury and RB staff had discussed the matter at an early stage, but it doesn’t appear to have been treated very seriously in that there was no file note or record of those discussions kept, and no evidence of any discussion of the issues or risks with the Minister. The papers suggest they were having a great deal of difficulty getting able people to even consider appointment, and perhaps that meant standards slipped. They shouldn’t have.
Finally, one of the things that has interested me about the new RB legislation was the addition of the requirement that other parties in Parliament be “consulted” before Board appointments (including of the Governor) are made. In the release, there is a record of letters of consultation being sent to the other parties in Parliament. Sadly, there is no sign that any party raised any concerns about the Finlay appointment even though his chairmanship of NZ Post was explicitly mentioned in each of the consultation letters. I’ve been sceptical that the consultation requirement would mean anything much in practice, but it is sobering that no other party even appears to have raised the conflict of interest issue re Finlay, even when the letter was right in front of them. (For the record, National and ACT did send brief responses back to the Minister raising concerns about the later block of appointees announced in June.)
UPDATE: A further post on the same issues.