A resignation by a director and an apology by one of the most powerful people in the public sector have followed Herald reports airing concerns over potential conflicts of interest involving Reserve Bank (RBNZ) board appointments.
Byron Pepper recently resigned from the Ando Insurance Group board, further to him joining the RBNZ board on July 1, the Herald has learned.
Finance Minister Grant Robertson, who recommended Pepper be appointed to the RBNZ board, said his involvement with Ando wasn't expected to create a conflict of interest because Ando isn't regulated by the RBNZ. Rather, The Hollard Group, which has a 39.95 per cent stake in Ando, is licensed by the RBNZ.
"But to avoid any perception of issues, I understand Mr Pepper has tendered his resignation from the board of Ando," Robertson said.
Ando provides insurance on behalf of Hollard. It works with insurance brokers, assesses insurance claims and takes care of the other operational aspects associated with administering insurance. But customers' contracts are with Hollard.
The Herald explored this dynamic in an article published on June 30, when Robertson announced Pepper's appointment to the RBNZ board.
Just over a week earlier, on June 21, the Herald reported on a potential conflict of interest surrounding another appointee to the RBNZ board – Rodger Finlay.
Ahead of joining the RBNZ's new governance board, which became operative on July 1, Finlay spent more than eight months consulting to the RBNZ as a "Transition Board" member.
The point of contention was that Finlay was also chair of NZ Post. NZ Post has a 53 per cent shareholding in Kiwi Group Holdings, which owns Kiwibank.
The RBNZ regulates Kiwibank, ensuring it holds enough capital, complies with anti-money laundering rules and follows loan-to-value ratio mortgage lending rules, for example.
The Herald's June 21 article included comments from central banking experts who were worried that even though Finlay's appointment was legal, it wasn't – in their view – in the spirit of the law.
Documents released under the Official Information Act to one of these critics, Michael Reddell, show that on the afternoon of June 21, an adviser in Robertson's office wrote to Treasury officials saying media were making enquiries about Finlay.
The adviser said discussions around any potential conflicts of interest involving Finlay's appointment had taken place but weren't documented by the Treasury.
"As there was a potential conflict of interest, albeit deemed manageable, this should have been noted in the relevant paperwork to inform Cabinet discussions and ministerial decision making," the advisor told the Treasury.
The following day, Secretary to the Treasury Caralee McLiesh wrote to Robertson to apologise for the Treasury neglecting to flag potential conflicts of interest regarding Finlay in two different documents.
One document was about appointments to the RBNZ board. The other, which was presented to Parliament's Appointments and Honours Committee on June 8 and went to Cabinet on June 13, was about appointments to the NZ Post board.
"[T]he papers should have outlined that NZ Post is a majority shareholder of Kiwi Group Holdings Ltd, who in turn owns Kiwibank Ltd and that as Chair of NZ Post, there was the potential that Mr Finlay could have a perceived or real conflict of interest in also serving as a member of the Board of the Reserve Bank," McLiesh said.
"This matter was considered by the Reserve Bank and NZ Post legal teams and Mr Finlay's interests were deemed manageable and noted on the respective Conflicts of Interest Registers of each organisation."
Crucially, McLiesh's letter reveals Finlay had been reappointed chair of NZ Post. Robertson's office failed to mention this, despite the Herald asking his office, on June 13, whether Finlay's tenure would end on June 30.
Robertson on Tuesday explained, "The final decision to make an offer of reappointment to Rodger Finlay as the chair of NZ Post was made in June. Shortly afterwards Mr Finlay identified, for a mix of professional and personal reasons, that he would not accept this offer…
"There was a consideration from him that the job of being on the Reserve Bank board was going to be a very big job."
Asked whether Finlay made his decision before or after concerns around potential conflicts started being aired, Robertson said it was "contemporaneous".
Finlay hasn't responded to the Herald's requests for comment.
The role of the RBNZ board changed from July 1, in accordance with a change to the Reserve Bank Act.
From July 1 it became responsible for the RBNZ's governance and all its functions, other than monetary policy decisions (ie setting the official cash rate).
The board also became responsible for financial policy matters – developing prudential requirements for banks, other deposit-takers and insurers, supervising these entities, doing crisis management and running the new deposit protection scheme.
Finlay and Pepper are among the RBNZ board members with the most experience when it comes to financial policy.
Of the eight members on the board, Pepper is one of two members with prudential regulation experience. He also has experience in financial services.
Meanwhile Finlay has experience in commerce, financial services, governance, organisational change and chartered accountancy/chief financial officer work.
Both Finlay and Pepper are being paid $1300 a day for RBNZ board work.