Financial Markets Authority chief executive Rob Everett (left), and the Reserve Bank Governor Adrian Orr, now face a fresh round of inquiry into ANZ's governance performance. Photo / File
The last month has been an embarrassing debacle for the ANZ board.
That's probably the best spin you can put on events which started with a serious breach of capital requirement regulations in May and has seen chief executive David Hisco depart under a cloud around his personal expenses and then unanswered questions about the sale by the bank of a luxury mansion to Hisco's wife.
Has the board the board failed in its duty to disclose related party transactions? Has there been a culture of executive excess at ANZ?
And crucially - for the Reserve Bank at least - has public confidence in the banking sector been undermined by this mess.
That board - made up of some of New Zealand's most experienced and well respected directors - now faces two formal reviews by the Reserve Bank and a potential Financial Markets Authority investigation as the market regulator looks in to what it describes as "reporting of related party transactions."
In the immediate wake of Hisco's departure, ANZ could at least make the case it was front footing the expenses issue- taking a hard line on an old-school corporate culture in the wake of the Australian Royal Banking Commission.
But that line appears to be deeply undermined by the property sale revelations.
The house - which Hisco lived in - at 269 St Heliers Bay Rd was purchased by ANZ New Zealand-owned subsidiary company Arawata Assets in 2011 for $7.5 million and was on-sold to Hisco's wife Deborah Veronica Walsh in July 2017 for $6.9m.
As of July 1 2017, the property at 269 St Heliers Bay Rd had a Rating Valuation of $10.75m, according to Terranet.
Since the revelations of the house sale, there has in fact been very little spin from the bank.
In statements from the communications team we have been told that ANZ approached the FMA voluntarily and is seeking to reassure that its financial accounts are all in order.
We have been told that all the appropriate independent valuations on the house were done.
But from there ANZ has fallen back on the line that this is an employment matter.
We are left to wonder why the property was sold to Hisco's wife, rather than him?
Was the point to bury the transaction from public view?
And why - despite extensive renovations, and despite being owned across six years of an historic property boom - the price fell?
Did details of this sale come as a surprise to the board last week?
Acting-chief executive Antonia Watson must have known. She was a director of the property holding ANZ subsidiary that sold the house.
There's no doubt that, as former Prime Minister, ANZ New Zealand chairman Sir John Key's profile adds currency to the story.
But the timing of the issues - the capital breach, the house and other expenses- largely pre-date his start at the bank in October 2017.
That potentially puts the spotlight on longer serving directors - high profile individuals in there own rights.
Three independent directors - Joan Withers, Mark Verbiest and Tony Carter - have been on the ANZ board since 2013.
The others are parent company representatives - ANZ Group chief executive Shayne Elliott and ANZ Group chief financial officer.
It's clear that Reserve Bank is very unhappy about the current situation and the impression it has left with the public.
It is seeking some answers.
"Culture comes from the top and boards and senior managers at our financial institutions need to be leading by example," said Reserve Bank Governor Adrian Orr on Monday.
The FMA and RBNZ had just released final feedback on a long running review of bank conduct an culture.
The review was limited in scope and focused primarily on how well customers were being served. It did not deal with the issue of culture at an executive and board level.
But Orr noted "a much bigger concern and question about the culture being instilled and fostered at governance level".
Those words seemed pointed.
"Boards are critical in leading the cultural shift that is needed to promote long-term customer outcomes. It is critical to embed new processes and governance systems within banks, and we will be monitoring their progress with this important work," he said.
In tandem - although in a separate news release - Orr enacted something called "Section 95" of the Reserve Bank Act.
That gives it the power to demand an independent reports from the banks.
It has requested two from ANZ - one on the bank capital breach, the other on the broader concerns around "internal governance".
The RNBZ and ANZ now have to agree on the terms of reference for these reports - and its understood they are still in the process of working that through.
They have to agree who will conduct the independent review - two different people with specialist skills in the respective areas.
That will likely mean a senior lawyers or accountant - although finding one that is completely independent of New Zealand's largest bank may not be easy.
Once that's all done the process is still likely to take several months.
And while the conclusions will certainly result public statements by both parties - it is not certain that the full reports will be published.
Also uncertain is what teeth the Reserve Bank really has to punish any potential governance failures.
It has been noted the RBNZ does have the power to impose fines - up to $200,000 for an individual or $2 million for a corporation.
It even has the power to imprison "for a term not exceeding 18 months".
But as related to Section 95, those penalties are largely set down for failure to deliver the independent reports or failing to fully disclose in them.
There is some precedent around the capital breach issue.
In late 2016 Section 95 was invoked when it emerged that Westpac had breached its own measurement of its capital ratio requirements.
The review process took almost a year to complete.
It concluded with the Reserve Bank deciding that Westpac's "conditions of registration should be amended to increase its minimum capital levels until the shortcomings and non-compliance identified in the independent report have been remedied."
There is less precedent for the second ANZ review.
This makes it all more important as it may be setting a precedent.
Based on the language in speech made by deputy Governor Geoff Bascand last, the Reserve Bank plans to use Section 95 more widely.
In his speech to the Financial Markets Law conference on Wednesday Bascand said there was "a strong case for further increasing the intensity of our supervisory model".
Regulated entities (ie the banks) can "expect our supervision to be more intrusive", he said.
"We will be more proactive in holding directors and managers to account, particularly in areas where we have already identified short comings."
ANZ has done no favours for those in the banking industry seeking to maintain a light-handed regulatory approach in New Zealand.
But for now Section 95 is all the RBNZ has to hang it sheriff's hat on.
Last week we heard some tough talk from finance minister Grant Robertson.
He suggested that providing the Reserve Bank with tougher tools for enforcement may be part of the Phase 2 review of the Reserve Bank Act.
That's the same review that will now look at the possibility of a bank deposit guarantee scheme.
So what next for ANZ's leadership?
These issues seem destined to head off into the vortex of a lengthy and complicated review process.
Typically in New Zealand this is where we see public interest wane, taking pressure off all concerned.
But there's no doubt the events of the past month have shaken the whole banking sector.
If the culture at the top wasn't already changing - it is now.
House prices will be 20% lower in real terms by the mid-2030s than in 2021.