Banking Ombudsman Submission on Bank Breach Reporting and Materiality

www.bankomb.org.nz | help@bankomb.org.nz | 0800 805 950 Freepost 218 002 | PO BOX 25 327 | Featherston St | Wellington 6146 Prudential Supervision Department Reserve Bank of New Zealand PO Box 2498 Wellington 6140 Email: stocktake@rbnz.govt.nz Dear Submission on Consultation Document: public and private reporting by banks of breaches of regulatory requirements, with consideration of materiality Thank you for the opportunity to comment on the proposed changes to the reporting and publishing of regulatory breaches by banks. Context The Banking Ombudsman Scheme is an approved dispute resolution scheme under the Financial Service Providers (Registration and Dispute Resolution) Act 2008. Our participants are registered banks and their subsidiaries and related companies, and non-bank deposit takers that meet certain criteria. These criteria, regulated by the Reserve Bank, include the ability to demonstrate high-quality complaints-handling procedures. Our aim is to improve the banking experience for customers and banks, as well as to help resolve disputes between banks and their customers. We work with other agencies to increase customers’ knowledge of how banking works and to empower bank customers to better manage their banking affairs. Specific comments We note that publishing regulatory breaches on a dedicated webpage, linked to the Bank Financial Strength dashboard, was one of the proposals following the Regulatory Stocktake. We support the proposal because it would restore the loss of timeliness that has been caused by reducing the frequency of disclosure statements from quarterly to six monthly. It would also improve the usefulness, timeliness, accessibility and comparability of information disclosed to the public. We agree that the information could be limited to breaches that have occurred in the last five years in chronological order as this aligns with the time period for banks retaining published disclosure statements on their websites.

We note the options that have been presented for applying a materiality threshold to the publication of breaches and the proposed criteria for testing materiality. While we acknowledge that there are a range of factors that need to be carefully weighed in deciding what information is presented publicly, we support option 2 – introducing a materiality threshold – for the following reasons. In our view, the most important success factor for the website is making useful information available in a timely way for a wide range of stakeholders. Information that is simple, accessible and meaningful is likely to be engaging to the widest range of people. By focusing only on material breaches, the website will enable banking customers to easily identify relevant and significant breaches of prudential requirements, without having to scan through long lists of minor breaches. We note that banks would continue to report all breaches and potential breaches to the RBNZ in the same way that they do currently, and that the materiality threshold would only be applied in determining what information is presented on the website. On that basis, we are satisfied that option 2 does not reduce the RBNZ’s level of oversight. We agree that a focus on materiality may also have other positive flow-on effects. For example, it is likely to be better for all bank customers if bank directors are focusing their time and effort on the appropriate strategic response to material breaches, rather than spreading their focus across process and compliance activities related to minor breaches. Finally, we agree that it is important to be transparent around the broad criteria that are applied to determine materiality, but that the RBNZ should retain flexibility and discretion in applying specific thresholds. Thank you again for the opportunity to comment. Yours sincerely Nicola Sladden Banking Ombudsman