Reserve Banks defends board appointee with Kiwibank ties

Conflict of interest could "be managed appropriately," chairperson says

By Mina Martin

22 Jun 2022

The Reserve Bank has defended the appointment of its new board member, Rodger Finlay, who also has close ties to one of the five major banks.

Finlay, chairperson of New Zealand Post, which has a stake in Kiwibank, will take on more responsibilities for carrying out the central bank’s responsibilities starting July 1.

But Finlay’s appointment has shocked central banking commentator Michael Reddell, who opposed him having both a central bank role, and a governance role at the majority owner of a major bank. Redell used to work at the Reserve Bank, including holding the position of head of financial markets.

“This appointment should simply never have been made. It should be revoked, or Mr Finlay should do the decent thing and resign one or other of his NZ Post and Reserve Bank appointments,” Reddell told Stuff. “I don’t know Mr Finlay, had never heard of him prior to this appointment, and know nothing about him beyond what is on the bank’s own website. But he has just been appointed to the board of New Zealand banking system regulator by the minister of finance when he is also chair of NZ Post, which is the majority owner of the fifth-biggest bank in New Zealand.”

Neil Quigley, Reserve Bank chairperson, said Finlay’s conflict of interest could “be managed appropriately.”

“Mr Finlay’s interest arising from his position on the NZ Post board and NZ Post’s ownership stake in Kiwibank has been known and addressed from the outset,” Quigley told Stuff. “The interest has been noted in the bank’s interest register, and carefully considered in light of the requirements of the Reserve Bank of New Zealand Act 2021. We are satisfied his interest can be managed appropriately and does not disqualify him to be a member.”

Finlay had been working with RBNZ since Oct. 15 to prepare for the new powers being taken on by the board on July 1.

“Mr Finlay’s role on the transition board has been to have input into and assist with the development of new governance and policy frameworks that can be recommended to the new board when it is formally assembled on July 1,” Quigley told Stuff. “Mr Finlay’s deep governance experience has been invaluable in that context and will continue to be as a member of the board.”

Of the five major banks, Kiwibank is the smallest, has the second-lowest capital-adequacy ratio, and is the least profitable.

And although RBNZ stated in its May financial stability report that all the banks were strong and “well positioned with large buffers of liquid assets,” Reddell argued that Kiwibank’s position made it the most prone among the five to bail-out risk, suggesting that compounded the conflict of interest, Stuff reported.