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Thematic reviews

Cross-sector thematic review on governance

We have conducted a cross-sector thematic review on governance with the Financial Markets Authority (FMA).

Published:
Updated:

Governance Thematic Review report

In September 2023, we published a report with the key thematic findings from our Governance Thematic Review. 

The report was independently reviewed by Dr John Laker, former Chairman of the Australian Prudential Regulation Authority (APRA).

Dr John Laker | University of Melbourne

Governance Thematic Review report

PDF | 885KB

Governance Thematic Webinar

Non-participating regulated entities were invited to attend a webinar on the Governance Thematic Review on 30 October 2023. The presentation slides, updated to include a summary of the Q&A session, are available here.

RBNZ and FMA Governance Thematic Review webinar presentation slides (PDF, 453KB)

 

About the review

The RBNZ and FMA expect regulated entities to have effective governance arrangements to support boards in their crucial role. Such arrangements enable boards to make well-informed decisions, based on sound judgement and in the best interest of the entity, its customers, and its key stakeholders. These expectations are outlined in more detail in our respective governance requirements and guidance, which are now supplemented by this report.

As this is our first joint thematic review of governance across New Zealand’s financial sector, our focus is the foundational elements of governance, which includes frameworks, policies and processes necessary to assist boards to meet their obligations and help drive good governance outcomes.

We reviewed a sample of 29 entities regulated by the RBNZ and/or the FMA from across 4 sectors:

  • banking
  • insurance
  • non-bank deposit taking, and 
  • investment management sectors. 

What the review found

We observed a variety of governance practices in this review. There were many good practices and practices that were below our expectations. Most entities still need improvement to ensure robust and comprehensive governance frameworks, policies and processes are in place.

Some particularly good practices we saw across the sample of entities included:

  • Formal and clear processes for planning and formulating strategy.
  • Strong processes for selecting and appointing new directors and the CEO.
  • Boards are composed of a majority of independent directors.
  • Clearly documented succession planning for CEOs and senior management.
  • Formal standalone conflict of interest policies.
  • Formal annual planning processes and work plans for the board and committees.
  • Regular education sessions for the board, including in-depth sessions on specific risk topics.

Some of the key areas for improvement across the sample of entities included:

  • The process for selecting and appointing the board chair and committee members was not robust.
  • Formal frameworks to assess ongoing board training needs were generally absent.
  • Succession planning for the board was not as formal and rigorous as we expected. 
  • Diversity policies did not apply to the board.
  • Capacity of directors was not assessed in a consistent and robust manner.
  • Internal board performance evaluations were inadequate and most entities did not undertake an independent evaluation of board performance.