The Opposition's warning about 'dubious' Reserve Bank board appointments

ACT Party leader David Seymour urged Finance Minister Grant Robertson reconsider two proposed RBNZ board appointments. Photo / Marty Melville

The opposition is unhappy Finance Minister Grant Robertson ignored their calls to enhance the expertise represented on the Reserve Bank's (RBNZ) new board.

National Party Finance spokeswoman Nicola Willis and Act Party leader David Seymour in May raised concerns over the mix of people Robertson proposed be appointed to the board.

Emails they sent Robertson, who was obliged by law to "consult" them before recommending candidates for the Governor General to appoint, have been made public under the Official Information Act.

"The candidates you propose each have impressive records in their individual areas of expertise and have skills that would positively contribute to the board," Willis told Robertson.

"However, based on the information you have provided to us, the candidates appear to have limited experience in central banking and prudential regulation and supervision. We believe these competencies are essential and could be under-represented on the proposed board."

Seymour was more specific: "Your appointments to date look sensible, as do your proposals to appoint Byron Pepper and Hinerangi Raumati-Tu'ua.

"However, your other two appointments are dubious. Jeremy Banks and Rawinia Higgins (the latter in particular) appear to have no background whatsoever in economics, finance or banking."

Banks is a software developer who co-founded a company that created an app to help people learn te reo Māori, and a programme for iwi.

He has expertise in commerce, te ao Māori, te reo Māori, people and culture, and ESG (environment, social and governance), according to a table the Treasury put together during the recruitment process that showed how the proposed appointees satisfied 11 types of experience deemed desirable for the role.

Higgins only ticked the local government, te ao Māori, and te reo Māori boxes.

She is Deputy Vice-Chancellor Māori at Victoria University, a Waitangi Tribunal member, a Māori Centre of Research Excellence board member, and the chairwoman of the Māori Language Commission.

Seymour, in his letter to Robertson, went on to say, "I suppose if it's your intention to appoint people who bring a Māori world view then they [Banks and Higgins] can point to their expertise in fostering the Māori language and culture.

"However, you are appointing people with little other expertise relevant to the bank. I urge you to reconsider those two proposed appointments."

Robertson comfortable the right balance was struck

Robertson dismissed Seymour and Willis' pleas, recommending the Governor General appoint Banks, Higgins, Raumati-Tu'ua and Pepper to the board.

Robertson's recommendation came on the back of advice he received from a panel that interviewed candidates.

The panel included Deputy Secretary to the Treasury Leilani Frew, RBNZ transition board chairman at the time Neil Quigley, RBNZ transition board member at the time Rodger Finlay, and Treasury officials Murray Costello and Simon Wi Rutene.

Finance Minister Grant Robertson. Photo / Mark Mitchell

Asked why he didn't act on the concerns raised by Willis and Seymour, Robertson said he was looking for a "balance of people" to serve on a board that now has a "very wide mandate".

Under a major change to the Reserve Bank Act, the board from July 1 became responsible for the RBNZ's governance and all its functions, other than monetary policy decisions, ie setting the official cash rate.

It 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.

"So yes, they [board members] do have to look at issues such as financial policy and prudential matters," Robertson said.

"But we are also talking about the board that's responsible for the overall culture of the Reserve Bank. We were looking for people with experience in IT-related areas, because there are massive changes taking place there, and also for the 'people and culture' side.

"I took into account the views of the opposition, but ultimately decided not to agree with them."

Willis and Seymour were disappointed their concerns weren't properly acknowledged, let alone discussed.

The Treasury's experience matrix shows only two of the board's eight members have prudential regulation experience – Pepper and Quigley.

Pepper is an investment banking adviser and director who spent 22 years at Goldman Sachs. He recently stepped down from the board of Ando Insurance Group after the Herald published an article airing concerns over the fact one of Ando's owners – The Hollard Group – is licensed by the RBNZ.

Quigley, who chaired the RBNZ's old board, its transition board and now the new board, is an economics professor and current Vice-Chancellor of the University of Waikato.

Two of the eight board members have chartered accountancy skills or experience being a chief financial officer – Finlay and Raumati-Tu'ua.

Five have expertise in commerce, four in financial services, four in strong governance, and four in te ao Māori.

The other board members include professional director Susan Paterson and RBNZ Governor Adrian Orr.

Another potential conflict of interest involving Finlay

Finlay ticked several boxes in the Treasury's matrix. However, concerns have been raised over potential conflicts of interest posed by the mix of roles he's held.

Finlay is a director of Ngāi Tahu Holdings Corporation, which owns Ngāi Tahu Investments, which has a 24.9 per cent shareholding in Fidelity Life Assurance Company. Fidelity is an insurance company regulated by the RBNZ.

The RBNZ said "the interest was noted and declared" and "all board matters are managed to address any potential conflict of interests".

However Robertson said the potential conflict hadn't been drawn to his attention.

Government documents that address RBNZ board appointments note Finlay's Ngāi Tahu directorship, but don't make the connection to Fidelity Life.

As was reported on Wednesday, the documents also reveal Secretary to the Treasury Caralee McLiesh in June wrote to Robertson to apologise that the Treasury hadn't documented a potential conflict of interest created by Finlay being a RBNZ board member and NZ Post chairman.

NZ Post has a 53 per cent shareholding in Kiwi Group Holdings, which owns Kiwibank, which is regulated by the RBNZ.

McLiesh acknowledged Finlay's interests should have been documented in papers that went to Cabinet to address his appointment to the RBNZ board and to reappoint him NZ Post chairman.

Robertson explained that the day after Finlay was reappointed NZ Post chairman, on June 13, he turned down the role.

The Herald started enquiring about Finlay on June 13, ahead of publishing a story on June 21. McLiesh sent her apology to Robertson the day after the story was published.

Neither National nor Act raised concerns about potential conflicts of interest involving Finlay when they endorsed his appointment to the board.

It is legal for an RBNZ board member to sit on the board of a company that has an ownership stake in a regulated entity. There would be a problem, legally, if the RBNZ board member was a director of the regulated entity itself.

Diversity difficulties

The government documents show Finlay was deemed the strongest candidate of the 109 who were in the running to join the RBNZ's transition board, set up in October 2021 to help the new board become operational in July.

However, the Treasury and Quigley were worried the shortlist of eight, which Finlay was part of, wasn't diverse enough. So, they got the recruitment agency they were using to broaden its search.

This didn't solve the problem, so Robertson directed the Treasury to ask experienced director and RBNZ advisor, Suzanne Snively, to join the transition board. Snively, who is currently advising the RBNZ on its deposit protection regime, obliged.

The documents show the Treasury and Quigley had more luck finding a diverse range of candidates for the new board. Around half of those who applied were women.