Rodger Finlay and OIA obstructionism

It is sometimes hard to tell when Reserve Bank actions are concerted, when somewhat chaotic, and quite what mix applies in any particular case.

Earlier this week I wrote about MPC member Peter Harris’s “interview” – responses to an initial series of emailed questions – with Stuff’s Tom Pullar-Strecker. I assumed it was coordinated and managed by the Bank – though on reflection who could possibly have advised Harris to answer as he did – but it appears the trainwreck, which reflects poorly on both him and the institution, may have been almost all of his own doing.

And then there is the saga of Rodger Finlay, appointed last year as part of the Bank’s “transition board” and as a full Board mmbers from 1 July this year while he was – and intended to continue as – chair of the board of NZ Post, the majority owner of Kiwibank, an entity subject to the Reserve Bank’s prudential regulation and supervision. It was a staggering conflict of interest, almost inconceivable in any well-governed country, that the Reserve Bank itself (Governor and outgoing Board) seem to have had no problem with. Ever since I noticed this appointment in June, I have been trying to get to the bottom of what went on.

Both The Treasury and the Minister of Finance have answered OIA requests in a fairly timely, and apparently fairly open, way. Not so the Reserve Bank. The text below is from a post dated 27 October.

I replied to that apology thus

And I few days later I had this from the Bank, with specific suggestions – from them – on framing the request

I responded the next day

And within a couple of hours she responded

Note that “next couple of days” in the first paragraph.

I heard nothing more until Tuesday, which must have been almost the last of the 20 working days the Bank had to respond. Then I received an email from the same staffer advising me – no great surprise, and I wasn’t greatly bothered – that they were extending the request and giving themselves another 14 working days. But, as I noted to myself, at least I’d have results by Christmas.

Note that the reason given for the extension was “This is in accordance with section 15A(1)(b) of the OIA, where the consultations necessary to make a decision on the request are such that a proper response to the request cannot reasonably be made within the original time limit.”

But late the next day I had a lengthy letter from one Adrienne Martin, Manager Government and Industry Relations, and apparently Ruth’s boss, threatening to refuse my request altogether on the grounds that it would – she claimed – take an estimated 67 working days to respond to it, an estimate itself (she claimed) based on a narrower request than the one the Bank had suggested (see above), as refined (see above). After rehearsing the options open to the Bank she concluded thus

All of which has already bought the Governor 5 months of delay in getting any clarity on how he, his senior managers, and/or the old Board thought it could possibly have been appropriate to have appointed the chair of the majority owner of a registered bank, supervised by the Reserve Bank, to the board which would take full legal responsibility for all the Bank’s supervisory and regulatory functions.

I’m not yet sure how I will respond. I simply do not buy the “67 working day” line, and it is particularly incredible when they offer that they will provide a substantive summary of the relevant emails (presumably they don’t take the affected parties 67 working days to find, let alone summarise). Moreover, the Bank’s General Counsel has form as an aggressive and very motivated player, championing the Bank’s corner, and (more specifically) earlier releases suggest that he and his staff were themselves key participants in these discussions, so how much confidence should I have in the integrity of the process? I’m also not just interested in the “conflict of interest management” but how the Bank came to take the view that this conflict could ever be manageable (substantively and reputationally) when few/no other serious bank regulators would have.

On the other hand, the alternative may be ending up with nothing at all.

As a reminder, the Bank regularly claims it is very open and transparent. As I have pointed out for years – predating Orr – they tend to be fairly transparent about things that advance their interests (who isn’t?) but not otherwise, and real transparency and accountability encompasses both. The Bank falls a long way short and this is just the latest example. Serious questions have been raised about the Bank’s involvement with a major public appointment. An open and transparent central bank, once serious questions were being raised, would have been pro-active in identifying and releasing all the relevant papers, making a public statement, and perhaps opening themselves up for serious questioning.

But this is the Orr/Quigley Reserve Bank.

The public deserves better.

UPDATE (5/12): I gave up, and sent this response this morning

Rodger Finlay

If you have long since lost interest in my series of posts as to how Christchurch company director Rodger Finlay came to be appointed by the government as a director of the Reserve Bank (in its new governance model where the powers, including bank regulatory ones, rest with the Board) while, it was envisaged, he would keep on as chair of NZ Post, the majority owner of a bank (Kiwibank) the Reserve Bank prudentially regulates and supervises, and the spin around it, feel free to stop here. The title of the post was due warning. But sometimes you have to see things through to the end.

A couple of weeks ago, I wrote here about (and excerpted) The Treasury’s incident report about the Finlay affair, and specifically the events that led to the Secretary to the Treasury providing a written apology to the Minister of Finance for the failure of her staff and organisation to explicitly draw to the attention of ministers the conflict of interest issues around Finlay’s appointments, either when he was being appointed to the Reserve Bank Board a year ago, or when Cabinet was agreeing to his reappointment as chair of NZ Post in June this year.

Yesterday I had two more OIA responses. Appointments to SOE boards are on the joint recommendation of the Minister of Finance and the Minister of State-owned Enterprises, and I had asked both ministers for material relevant to Finlay’s NZ Post reappointment (and withdrawal from that post) in June. Megan Woods had been the SOE minister responsible, but she apparently declared a potential conflict of interest, around her personal and professional relationships with Finlay, and so formal responsibility was shifted to Kris Faafoi (as it turned out, by the end of this he was in his last few days in office). Faafoi having left office, his papers on the issue are coming only slowly (early next year I’m told) but The Treasury did yesterday release the papers they had relevant to the appointment process Faafoi was involved in.

Treasury OIA response re acting Minister of SOEs and reappointment of Rodger Finlay as NZ Post chair Oct 2022

and Grant Robertson also provided his response to a similar request, but which also covered contacts with journalists on the Finlay appointments.

MoF OIA response re Rodger Finlay and the NZ Post board Oct 2022

In total there is about 50 pages of material

Taking the Treasury response first, there isn’t a great deal that is new.  The relevant paper to the Cabinet Appointment and Honours (APH) Committee is included in full.  It doesn’t note any conflict of interest issues (but we knew that from the Secretary to the Treasury’s apology and their report) but their description of NZ Post itself is a little surprising.

with no mention that NZ Post is also the majority owner of the 5th largest bank in the country.

I was slightly amused by what was, and wasn’t, kept secret about Finlay’s personal details

and the fussing around in the paper about whether the board was going to be suitably “representative”

But perhaps the point of substance was an email to Treasury officials from Faafoi’s private secretary on 8 June after the APH meeting noting that “Finlay’s reappointment went through APH today with no issues”.

While The Treasury had clearly been remiss in not including the conflict of interest issue in the papers, quite where were ministers (whether those proposing to make the appointment – and especially Robertson – or those deliberating on it)? Did it not occur to any of these people – either then, or when the RB Board appointment was made – to question whether it was really quite right to have someone responsible for bank regulation also chairing the majority owner of a bank. It is hardly as if Kiwibank’s ownership was a secret, and the APH paper does note that Finlay had been appointed as a Reserve Bank Board member (and from the Robertson bundle of documents we find talking points The Treasury had prepared for Faafoi, one (of a handful) of which explicitly states that he has been appointed to the Reserve Bank Board)? Or do conflicts of interest, real or apparent, just not matter to this government?

Most of the interest in the Robertson bundle is in the exchanges by members of his staff with various journalists about the Finlay issue.

But there is also an email exchange on 10 June, the day my first post on the Finlay issue appeared. We know from The Treasury’s incident report that prior to 8 June (the day of the APH meeting) Finlay had approached Treasury suggesting that he could take leave of absence from the NZ Post role until the (then not known to the public) reshuffle of Kiwibank ownership went through – it had initially been planned, so the documents show, to have had this reshuffle wrapped up by 30 June).

Anyway, on 10 June my post went out at about 8:30am (it is in my email inbox at 8:32) and at 9.34am Finlay himself sent a link to the post, without further comment, to four Treasury and NZ Post addressees. At 3:21pm, Treasury is emailing people in the relevant ministers’ offices, cc’ing the NZ Post people

I found it interesting that the official states “This potential concern has been on our radar” – what, just waiting for someone (whether me or another observer) to notice the egregious conflict involved in having the chair of the majority owner of a bank sitting on the governance board of the bank regulator? And so they suggest rolling out what Finlay himself had proposed – that he temporarily step aside from the NZ Post role – and had gone far enough to get the agreement of another director to act in Finlay’s place if ministers were to go with this option.

But that didn’t happen. The Treasury report says Finlay himself called the Minister of Finance, and the Minister took the view that as the potential conflict had been considered when the initial (RB) appointment was made and nothing had changed, there was no reason for Finlay to stand aside. Except, of course, that we know that the advice to Ministers and Cabinet in late 2021 had not mentioned the conflict, and neither had the advice to other political parties when, as the RB Act requires, they were consulted on Finlay’s RB appointment.

It is also pretty extraordinary – and this isn’t picked up in Treasury’s report – that there was no sign that these Treasury officials (or perhaps Finlay) really recognised the character of the Finlay conflict. He could have temporarily stepped aside as NZ Post chair and would still be responsible for bank regulation and supervision around Kiwibank during that period, and almost all regulatory decisions have effects longer than a few months standdown might imply. To address the conflict by means of temporary stand-down it would have to have been the Reserve Bank Board he stood down from, but the Reserve Bank role isn’t even mentioned here, and nor were Reserve Bank officials copied on the emails from either Finlay or Treasury.

And so Cabinet went ahead and on 13 June reappointed Finlay for three years. And on 14 June Finlay wrote declining the appointment.

The first journalist to have asked Robertson anything about the Finlay issue was the Herald’s Jenee Tibshraeny.

At the time of this phone call and email, it was full steam ahead. Cabinet had approved Finlay’s reappointment and the letter of offer was going out.

It took the best part of two days, and multiple reminders, to get an answer out of Robertson.

The delay was convenient as by this time – and against the wishes of the Minister – Finlay had stepped aside, and finally personally resolved the conflict issue. Against that backdrop, the Minister’s answer to the Herald was pretty much active and deliberate disinformation.

The next lot of media inquiries worth mentioning was on 1 July (the day after the rest of the new Reserve Bank Board was announced, including reference to Finlay as “previously” chairing NZ Post. Stuff’s Rob Stock asks Robertson’s senior press secretary

Who, in a series of email exchanges also engages in an active attempt to put the journalist off the trail (pretty sure the government would call this “disinformation” if anyone else was doing it).

First, the Minister was sick and couldn’t comment, but there was no news because Finlay’s term was due to end on 30 June. Stock responds that he didn’t recall either the RB, the Minister or Finlay “mentioning this was the plan for managing the conflict”, to which Bramwell responds disingenuously “I’m not sure if it was the ‘plan’…..you’d have to talk to Mr Finlay about that – or perhaps the RBNZ?”. Stock immediately responds (presumably of attempts to get others to comments) “No comment, not available, talk to Minister”. Whereupon Bramwell (for the Minister) again avoids answering the actual question with this response

Stock must have given up at that point. But if Bramwell’s last response was a non answer, it was nonetheless interesting since (a) it points us to Reserve Bank involvement in the political spin, and b) tells us that the Bank concedes that there may well have been “material conflicts of interest” from 1 July had the government gone ahead with its plans and Finlay not, at the end, done the decent thing.

There is a final rounds of exchanges between Tibshraeny and Robertson’s office at the end of August. These requests came after some earlier OIAs had begun to shed more light. You can read the exchange for yourself. On Finlay, the key question is “How was it ever ok for Rodger to be NZ Post chair and on the new RBNZ Board at the same time? [as the government deisred and intended]. Even [if] this would’ve been within the law [which it was] it surely would not have been within the spirit of the law”. There is never a straight answer from the Minister, just a deflection to the Reserve Bank who, she was told, concluded that “any conflict of interest…could be managed”.

Tibshraeny’s final question is about an issue I was not aware of until she identified it: that Finlay is a director of Ngai Tahu which now owns a 24.94% stake in Fidelity Life Assurance, an insurance company regulated by the Reserve Bank. That deal was not settled until early 2022 but had been agreed on before Finlay was appointed to the Board (and “transitional board”) late last year. That appears not to have been disclosed or discussed when his appointment was made. In Tibshraeny’s final email she notes “So, not great…..”

There have been so many issues to keep track of – including the other new director who when appointed was also on the board of an insurance company that for some reason was not regulated by the Reserve Bank (before there was a belated rethink and he resigned from the insurance company board) – and the Fidelity stake isn’t controlling so that on its own I can’t get too excited about it. But it does tend to speak to a pattern – running across all those involved here – that all that matters is the letter of the law, and nothing at all about the appearances, and the potential for actual or apparent conflicts. Finlay should, right upfront, have identified both the Kiwibank and Fidelity stakes as potential conflicts – and should never have put himself forward if he intended to stay on at NZ Post. In combination, they should have been disqualifying – to The Treasury and to Ministers.

As far as I can see no one emerges very well from this whole saga, with some slight brownie points to Finlay who did after all finally step aside. The Treasury did poorly, perhaps so too did their recruitment consultants, the Brian Roche interview panel (for the RB roles) did really poorly (and that includes the head of APRA who sat on the panel), ministers did poorly (Grant Robertson most of all). No one called stop at any point, and all seemed to be focused (if at all) on the letter of the law rather than the substantive issues that mean it would not be acceptable anywhere to have as director of the bank regulator the chair of a majority owner of a bank.

But if any of these people or groups of people should have stood up and called a halt (before Finlay finally did), so too (and perhaps above all) so should the Governor of the Reserve Bank. the chair of the Reserve Bank Board, and all their attendant senior managers and Board colleagues. Every one of them should have known the conflict was untenable and unacceptable (it was the immediate reaction of a whole bunch of former central bankers after my first post appeared), and quite damaging to the credibility of the institution.

But if you have been following this story since June, you may have noticed that there have been OIA responses, fairly timely ones, from the Minister and from The Treasury, and nothing at all from the Bank (just references to them and their involvement in some of the other documents). It isn’t for want of trying.

On 1 July, the day after the full Board was appointed, I lodged with the Reserve Bank a request for

…copies of all material relating to appointments to the new Reserve Bank Board, including all material relating to appointments to the “transition board”. 

Without limitation, this request includes all papers and other material generated within the Bank (other than of a purely administrative nature), any advice to/from or discussions with The Treasury, and any advice to and interaction with the Minister of Finance or his office on these issues.

It was directly parallel to similar requests lodged with the Minister and with The Treasury (both of whom responded substantively).

On 13 July, one of the many communications staffers got in touch to tell me

We have transferred your request to the Treasury as the information is believed to be more closely connected with the functions of the Treasury. In these circumstances, we are required by section 14 of the OIA to transfer your request.

You will hear further from the Treasury concerning your request.

I rolled my eyes – it was evidently a ploy (note I explicitly asked about material generated within the Bank, which other agencies would not necessarily be expected to have) and no doubt the Bank knew by then of my other requests – but did nothing more while I waited for responses from the Minister and The Treasury.

Having received those responses, on 3 September I went back to the Bank to renew my request (all on the same email chain, so there was no ambiguity about what the request was)

I am writing to renew my request.  You transferred the request to The Treasury, but (as I’m sure you know) their release provided nothing on anything the Bank, its staff or management, Board or “transitional board” members said, wrote or did.  I now know from the responses to similar OIAs to The Treasury and to the Minister of Finance, that the Board chair was involved in the selection of new board and transitional board members, Rodger Finlay (then a “transitional board” member) served on the interview panel for the second round of Board appointees, that RB legal staff had discussed issues around potential conflicts of interest for Rodger Findlay.    Against that backdrop (and the media coverage of the Findlay situation in late June), it is inconceivable that there were no papers, emails or the like on any matters relating to the selection and appointment of Board members, whether or not such material was conveyed to The Treasury or to Minister.

That was almost two months ago. It was only yesterday I thought to check up on it and have sent them a note pointing out that I did not yet appear to have had a response. It increasingly appears as though the request will have to be referred to the Ombudsman.

But no doubt the Governor and his colleagues will keep on with the spin about being a highly transparent central bank. At this point, you really wonder what they can have left to hide, but perhaps the secrecy and obstructiveness is just some point of unprincipled principle?

UPDATE: About 40 minutes after this post went out I had an email from the Reserve Bank offering what appears to be a fairly abject apology for allowing this request to have fallen through the cracks, promising process improvements etc. Accidents happen, system aren’t foolproof (even with 20 comms staff), so I am inclined to take them at their word, but I guess it means I might finally get a response by Christmas.

Rodger Finlay: The Treasury’s incident report

Regular readers will recall that since June I’ve been on the trail of events surrounding the appointment of Rodger Finlay as, first, a “transitional board” member (attending actual Board meetings) and then a full Reserve Bank Board member, at the same time that he was chair of NZ Post, the majority owner of Kiwibank, an entity subject to Reserve Bank prudential regulation and supervision. From 1 July, the new Reserve Bank Board had legal responsibility for all the powers the Reserve Bank had on prudential policy and implementation. Finlay’s term as NZ Post chair was due to expire on 30 June, but processes were in train that saw Cabinet reappoint him on 13 June.

The most recent post was here. The story gets a little complicated, and there have been various documents (from the Minister of Finance and from The Treasury), and comments from the Minister or his office reported by the Herald. From that 31 August post

In the earlier documents, it was noted that the Secretary to the Treasury had asked for a report from her staff as to what had happened, how, and what if any process changes needed to be made. That report was released to me this afternoon and is here.

Treasury incident report on Rodger Finlay conflicts and appointments

This was the first stage

It reflects very poorly on The Treasury staff concerned (Treasury is after all responsible for monitoring reviewing the Bank), the Reserve Bank Governor and Board chair (who seem to have been more interested in some legalistic narrow definition than in either appearances or substance), and the interview panel, including the head of the Australian Prudential Regulatory Authority who, if the issue came up as Brian Roche says, should have been making the point that it should be unacceptable to have the chair of the majority owner of a bank sitting on the board of the prudential regulatory authority.

As I’ve noted before, it reflects poorly on Finlay too, who signed an application stating that he had no conflicts.

Treasury goes on to note that they did not advise the Minister of the potential conflict issue so that he could make his own informed choice, and nor were other political parties (who had to be consulted) advised.

They go on to note that in the process of planning to reappoint Finlay as NZ Post chair (a process that ran for some months) the issue of the potential conflict was also not advised to ministers.

And then we get this

I guess it is encouraging that Finlay belatedly raised the issue, even if he then let the bureaucrats convince him there wasn’t an issue.

Then there was this

From context, Project K is clearly the scheme to have the Crown buy out the existing (Crown bodies’) shareholdings in Kiwibank. Again, it is perhaps encouraging that Mr Finlay again broached the issue of potential conflicts. It also makes sense of this from the minutes of the RB “transitional board” on 9 June (which I had been puzzling over).

and the story rounds off here (Cabinet having made the NZ Post appointment on the 13th)

Which, as these things seem so often to do, again sheds particularly poor light on Grant Robertson as Minister of Finance, who was apparently totally unbothered by the actual or perceived conflicts even when Finlay himself had raised the issue – not even to accept the offer from Finlay to stand down from NZ Post until the Kiwibank deal was resolved (although as the RB was the regulator, if he was really serious he should have sought to take leave from that Board).

The report sums up

All of which is no doubt true, but it isn’t only (or even primarily) The Treasury’s reputation that should have been damaged by this (even if I now look on Finlay himself a little more charitably).

Anyone interested can read the rest for themselves, including the multi-page note on process improvements.

UPDATE:

It also reflects poorly on Robertson that (extract from my previous post) it is pretty clear that he actively misrepresented the situation to the Herald’s journalist.

Finlay, the RB Board, and related matters

The Herald’s Jenée Tibshraeny had a follow-up piece this morning on the Reserve Bank Board, with some interesting new information and (what appears to be) some ministerial spin and simply avoiding straight answers.

First we learn that Byron Pepper, appointed to the Board in late June, has now stepped down from his position as a director of an insurance company (Ando) that – by the vagaries of the details of the insurance legislation – is not an institution regulated by the Reserve Bank but is nonetheless substantially owned by another insurance company which is regulated, and which provides insurance on behalf of that regulated company. Again, it wasn’t illegal for Pepper to have held those two roles simultaneously, but it was quite improper, and it reflects poorly on him, on The Treasury (which made the appointment recommendations), on the Bank (Governor and key Board members), and on the Minister of Finance that it was ever allowed to happen. Reading again through the OIA papers I got back from Robertson the other day, it appears that Rodger FInlay was on the interview panel……so perhaps we should be less surprised. It is as if they have no sense of ethics, or of conflicts of interest in any sense other than the narrowly legal.

We don’t know whether Pepper jumped (volunteered himself to step down from Ando having thought again and realised it was a very bad look for an honourable person) or was belatedly pushed (by the Minister of Finance, Orr/Quigley, or The Treasury). My money would probably be on the Minister and the Beehive but if the conflict should never have been allowed to have arisen, at least it has been sorted out.

The sheer spin comes regarding Finlay.

Here is the timeline we know:

  • back in May 2021, Finlay put himself forward for appointment to the Reserve Bank Board (that is when positions for the Transition Board and the real thing were advertised).  He was chair of NZ Post then, it owned a majority of Kiwibank then.   From the documents Robertson released, we know he then signed a conflict of interest declaration stating “I can confirm that at the time of any Reserve Bank appointment I would not have any relevant conflicts of interest”.
  • In October 2021 Cabinet agreed to appoint him to the full Reserve Bank Board from 1 July 2022, and noted that the Minister had appointed him to the “Transition Board” (formally, as a consultant to the Reserve Bank during the establishment period prior to 1 July 2022).
  • No political parties raised any objections when they were consulted, as the new law required for Board appointments.
  • During the period of the Transition Board, Finlay was participating regularly in meetings of the then Reserve Bank Board.
  • On 8 June 2022, Cabinet’s Appointments and Honours Committee considered a paper recommending Finlay’s reappointment from 1 July 2022 as chair of NZ Post
  • On 10 June I wrote a post describing as “highly inappropriate” Finlay being both a board member of the prudential regulatory authority and the chair of the majority owner of Kiwibank, 5th largest bank in the country.
  • On 13 June, Cabinet approved the reappointment of Finlay as chair of NZ Post from 1 July 2022.
  • On 13 June, according to her piece, this morning, Tibshraeny asked Robertson’s office whether Finlay’s NZ Post terms would end on 30 June 2022 (which the existing term did). Her earlier reporting suggested she had been told – either by Robertson’s office or NZ Post – that FInlay’s term was ending on 30 June.  (Those messages, highly misleading as it turns out, somewhat allayed her concerns at the time, and mine.)  
  • On 21 June, Tibshraeny’s first article on the issue appeared.
  • On the same day there is a substantive email (reproduced in my previous post) from a ministerial adviser noting media concerns,and noting what were (at very least) process weaknesses, while also noting (it seems) that it had been hoped that the Kiwibank ownership restructuring would have been sorted out and that any conflict would have gone away.
  • On 22 June, there is a letter (again reproduced in my previous post) from the Secretary to the Treasury to the Minister of Finance apologising that nothing about the actual/potential conflict of interest had been drawn to the attention of ministers either when Finlay was appointed to the Bank role (last year) or when reappointed to the NZ Post role (a week earlier).  There is no hint in that letter that the Finlay NZ Post appointment was not proceeding, McLiesh simply noting that she understood the Minister would provide the relevant information at APH that same day.
  • By 1 July, Finlay was no longer showing as Board chair on the NZ Post website.

In Tibshraeny’s article she reports these comments from Grant Robertson

finlay

No thinking person should take this as a serious response.

We don’t know quite how many days RB Board members are expected to spend (my guess perhaps 25-30 a year) but it is hard to believe he had suddenly discovered it was going to be an unusually large commitment, especially as he had already spent 9 months actively engaged in the establishment phase and had served on various other public and private boards (and he was just an ordinary Board member, not holding the more time-consuming role of chair).   And had he had any doubts any serious figure would have resolved them in his own mind before allowing his name to go forward for reappointment to the NZ Post chair role.  As late as 22 June, he had been appointed by Cabinet (presumably his NZ Post Board and management colleagues had been told), and people from the Secretary to the Treasury down were still working on the basis the Post reappointment was going ahead.   But by 1 July it wasn’t a thing.

I suppose it is always possible that (say) a serious family health emergency arose in those few days that meant he had to consider all his business and professional commitments……but (a) it appears that the NZ Post role (the one involving a serious conflict) appears to have been the only one given up, and (b) it would be quite straightforward to let something like that be known (and we’d all sympathise).  But the article goes on “Finlay hasn’t responded to the Herald’s requests for comment”.  That’s telling.

Most likely the Beehive jettisoned him at the last minute, realising that with media coverage and serious concerns being expressed by various senior figures, it was just a dreadful look heading into the new RB Board regime – when the new the rest of the Board they’d soon be announcing were in any case likely to be attacked as underqualified – and not worth going ahead with the Post reappointment.  I’ve lodged fresh OIAs with the Ministers of Finance and State-owned Enterprises to see if we can learn more.

(One might wonder, if the Beehive story is correct, why they jettisoned him from the NZ Post role rather than the Reserve Bank one.  Perhaps they reckoned it would be easier to find just another professional director for NZ Post – although none yet seems to have been appointed – plus his current term was actually expiring on 30 June.  They probably hoped to get away without people realising they’d reappointed him just a few days previously.   But don’t overlook also that if Finlay seems like a no-better-than-adequate appointee for the Board of the central bank and regulatory authority, the OIA papers make it clear how much difficulty Robertson and The Treasury had had in finding anyone half-qualified to serve, and Finlay is described on several occasions as the best on offer.)

A few other points caught my eye reading through again the OIA I received.

Treasury used two quite separate interview panels for appointing RB Board members.  For the second wave, it was mostly Treasury and Reserve Bank people doing the interviews (including Finlay himself).  But for the first round (where Finlay was chosen), they used a fairly high-powered panel, chaired by government favourite Brian Roche.

Among the interview panel was the Secretary to the Treasury. I was astonished to find that (so Treasury reported) she was on the panel because the Governor had asked for her to “reflect the seniority of the positions” (shame about that looking at what we ended up with), and “to provide gender representation”.  Poor her, picked for purely tokenistic reasons.

But what really caught my eye was the presence of the head of the Australian Prudential Regulatory Authority, Wayne Byres, on the interview panel.   Frankly, that seemed a little odd, for several reasons.  First, one of the main relationships the Reserve Bank has to manage is that with APRA, and there will often – particularly at times of stress – be conflicting national interests.  Second, APRA doesn’t operate with a part-time non-executive board (the sorts of role this interview process was selecting).   But more generally, APRA is a pretty well-regarded organisation, and one might have hoped that having him on the panel would ensure at least one “adult in the room”, who really knew his stuff on the prudential side of what the Bank Board would be responsible for.      And yet there is no sign that Wayne Byres, chair of a well-regarded prudential regulatory agency, had any qualms about appointing to the board of the prudential regulator, the chair of the majority owner of the 5th largest bank in the country.     If he knew, did he really not care (there is no hint in any report to the Minister of any concerns being raised), and if he didn’t, how can it be that Treasury (providing the Secretariat to the process) or the Bank did not tell him?   I suppose the head of APRA doesn’t need to know much about NZ-only banks, but it seems like a failure all round (including on his part, as the most prudential governance attuned person in the room) not to have found out, not to have raised concerns.

And finally, the saddest thing about reading through the OIA papers was the gradual diminution in ambition as (presumably) it became clear that (a) it was getting really hard to find any capable people even willing to put their names forward, and (b) that the government/Minister just didn’t really care about the substance at all.

In what comes of not tidying one’s desk very often, I noticed a weathered copy of the newspaper advert from April/May 2021 for directors (transitional and permanent) sitting by my computer.  Among the things they were looking for were these

board advert

Good stuff you might say. 

But by February, from a report to the Minister they were reduced to this

Feb Board

and by April, as they were closing in on the final list of those who were actually appointed, we get this summary

april board

Perhaps a bit overqualified for a high-decile school board of trustees, and touching all sorts of political bases, but with no sign that any of them meet those ambitious “domain experience” goals once so prominent in their advertising. Oh, and no sign of any who are “visionary and influential with an international perspective and an awareness of global trends relative to the Bank’s operating environment and mandate”. The least underqualified would be the chair, but he was appointed only for a transitional two-year term. Here I might briefly disagree with Tibshraeny, who describes Finlay and Pepper as the two Board members with “the most experience when it comes to financial policy”: in fact, although both have worked in financial institutions, neither has any apparent background in prudential or related policymaking, financial stability etc, at all

As for “strong ethics” and “experienced in managing conflicts of interest” we ended up with two directors appointed who had clear and evident ongoing conflicts of interest, one of whom was involved in selecting the other. Are these really fit and proper people to be regulating and holding to account financial institutions (and those who run them), let alone the Governor? (And as a reminder, the Board is responsible for appointing and holding to account the Governor and the Monetary Policy Committee: they appear woefully underpowered when it comes to either aspect of their role.)

Then again, neither the Governor, the chair of the Board, the Minister of Finance, the Secretary to the Treasury, nor the Treasury staff charged with doing the donkey-work and actually managing these processes, seems to have seen any problem. Those asked don’t seem interested in straight answers or accountability either. And that should be even more concerning, as a reflection of what public life and governance in New Zealand seems to be becoming like.