FMA chief executive Rob Everett told RNZ it had asked the banks for assurances, including in writing as to the procedures they were following to ensure the problems occurring in Australia were not happening here.
"We've asked them to provide assurances to us, the RB and the FMA, that they have scrubbed their business models and that they have a basis for being confident that these issues don't exist here."
Everett said it would also been testing those assurances to make sure they stacked up.
He said the regulator already had a lot of work already on track to look at the sector.
"What's been highlighted in the royal commission in Australia is ugly. I think it's devastating for the industry, the stories that are being told.
"Most of the issues that we've heard were well known to the regulators, they have surfaced before. So we have been spending time here in New Zealand making sure that our work plans react to that and where we're looking is somewhat driven by the experience in Australia."
Everett said it would be naive to say there weren't pockets of problems in the financial services sector in New Zealand.
"We certainly see things that could be improved."
But it hadn't seen evidence of the systematic issues seen in Australia.
"To date, we haven't seen any evidence of systemic abuses along the lines of the Australian industry, but as we've said to the New Zealand banks, we can't afford to be complacent, we really have to up our game to make sure that those same issues aren't being replicated here."
Everett said the Australian inquiry upped the temperature on the New Zealand arms of the Australian banks, which are the largest players here and include ANZ, ASB, Westpac and BNZ.
If it saw areas where the law had been breached or there was poor conduct it would take action, he told RNZ.
Everett said trust in Australia's banking sector had been damaged and the United Kingdom and the United States also had problems with trust in their banking sectors.
To date, New Zealand had been better but it would only take one or two blow-ups to damage that reputation, he said.
Sam Stubs, founder of KiwiSaver provider Simplicity, this week called for New Zealand to have its own banking inquiry.
But Everett said he did not believe that was needed at this point as New Zealand was already reviewing its insurance law, consumer credit laws and financial advice law.
"I would rather let that work progress before anyone leaps to any conclusions about whether or not to have an inquiry," he said.
No timetables have been set for the banks to report back, but it expected the first reports in the next few weeks.
New Zealand financial services businesses have defended themselves by saying the industry is different here.
The New Zealand Bankers' Association, in a letter to regulators, set out the regulatory and other market differences between New Zealand and Australia, and the initiatives the industry was working on to maintain public trust and confidence.
"We believe we have a strong banking culture in New Zealand. We fully accept we need to back up that position with proof, and we're happy to work openly and constructively with our regulators to do that," said association chief executive Karen Scott-Howman.
Some banks had already taken steps to address issues raised by the Royal Commission, the association said.
In addition to individual banks providing assurances to regulators on their own business practices, the industry was committed to continuous improvement.
The association set out a number of initiatives:
• Consider adopting an industry-wide whistleblowers' standard to ensure there are clear processes and safeguards for employees to raise conduct issues.
• Work with government agencies to establish a 'bad conduct' register to allow effective reporting of employee conduct that falls below community expectations.
• Finalise a new edition of the Code of Banking Practice that better communicates banks' existing customer commitments.
• Consider how to further change their remuneration policies to ensure retail staff no longer receive incentives based directly on sales performance.
• Consider how to provide further funding to regulators to ensure they can carry out their functions most effectively.
• Provide the Banking Ombudsman with further information on banks' internal dispute resolution schemes, to help ensure they are leading to good customer outcomes.
