The Reserve Bank can't promise there won't be a repeat of the CBL fiasco in which an NZX-listed company was ordered to keep secret for months the fact that its regulator believed it was insolvent.
RBNZ deputy governor Geoff Bascand told the New Zealand Shareholders' Association annual conference in Christchurch at the weekend that the insurance company regulator remains a strong supporter of transparency but that transparency has its limits.
RBNZ learnt a number of lessons from the independent review of its handling of CBL's collapse, including that it needed to act more decisively and earlier, Bascand said.
"The review endorsed our approach to confidentiality but said, if we're going to act confidentially, we've got to act quicker."
That was as close as Bascand got to explaining why investors were kept in the dark and CBL shares were allowed to continue to trade until February last year when the company's market capitalisation was $747 million.
That secrecy is at odds with the principles of continuous disclosure to investors of any material matters as they arise.
RBNZ became the regulator of New Zealand's around 100 insurance companies in 2013 and its focus had been on the larger, more systemically important insurers.
CBL "wasn't really high on our radar, it would be fair to say" because it was small and operated overseas, although it was growing fast.
One of RBNZ's problems was that CBL's management disagreed with RBNZ's views on what level of reserves it should have, Bascand said.
RBNZ first issued CBL a full insurance licence in September 2013, well ahead of CBL's October 2015 share float which raised $125m, and despite a KPMG report detailing a number of issues.
RBNZ had its own internal actuary report that referred to "a serious solvency issue" from Dec. 31, 2013 onwards.
Another internal RBNZ review in June 2016 also raised solvency issues and in October 2016, a regulator in Gibraltar raised its own concerns about CBL's solvency with RBNZ.
Then in mid-2017, European insurance companies that relied on CBL for reinsurance started running into difficulties with other European regulators who said those companies didn't have adequate reserves.
RBNZ asked CBL for an explanation and then appointed an independent investigator into its affairs in August 2017 but investors continued to be kept in the dark until the following February.
While outside investors in CBL then lost everything, CBL's promoters had already extracted more than $100m from selling down their interests.
One NZSA member asked Bascand what RBNZ has changed "so we don't buy any shares in companies that are already bankrupt."
Bascand said the first change was "a cultural one. We're going to be more sceptical and expect more evidence of what companies are giving us and looking for proof and being more willing to act."
He cited "some pretty public steps with regards to ANZ" as evidence of this cultural change.
In June, RBNZ demanded ANZ provide assurance that it is operating in a prudent manner and ordered it to engage an independent reviewer.
That followed RBNZ's order in May that ANZ had to hold more capital against both housing and farm lending than ANZ's own models indicated was warranted.
Earlier in May, RBNZ had ordered ANZ to use the standardised model to assess how much capital it needed for operational risk, one of 45 models ANZ uses.
"We're committed to acting early," Bascand told the NZSA conference.
RBNZ is also reviewing regulatory requirements and the role of actuaries to ensure the regime governing insurance companies is robust.
After saying this, Bascand said to the NZSA questioner, "You look a little unimpressed."
The questioner said it's still difficult for an investor to see how the likelihood of another CBL situation has been reduced.
Bascand said: "That is the difficult issue here. We can't do everything on your behalf. We can do the best we can do" but it's up to companies to report on their viability.
"When a company thinks it's better than it is, that's a very difficult circumstance. There are lots of issues involved that they believed, I would say wrongly, their own accounting information and their own estimates on claims," Bascand said.
CBL's own actuary and auditor had also accepted CBL's information as did the international ratings agency that specialises in insurance, AM Best.
"Why did they get a ratings upgrade from AM Best? I've got no idea," Bascand said.