This page sets out the corporate governance policy for New Zealand-incorporated, registered banks.
The three main components of the policy are:
Good corporate governance should ensure the interests of a company's shareholders are properly represented, via the board of directors, in the running of the company.
Main areas of interest for shareholders are risk management, the setting of corporate strategy and ensuring the strategy is followed through.
Corporate governance arrangements in banks also have implications for stability of the financial system as a whole. Where a New Zealand-registered bank is a wholly owned subsidiary, the interests of the parent entity can conflict with our objectives for prudential regulation and supervision.
Reflecting this concern, we state in our principles for bank registration that we need to be satisfied there will be enough separation between the bank and its owners.
So an important aim of our corporate governance policy is to promote an appropriate degree of separation in this way, on a continuing basis as well as when a bank is first registered.
Our corporate governance policy is not meant to be a comprehensive guide to good corporate governance practice. The two most relevant guides to corporate governance for New Zealand banks are the corporate governance handbook published by the New Zealand Securities Commission in 2004 and the Basel Committee's 'Principles for enhancing corporate governance'.
Principles for enhancing corporate governance (PDF 1 MB)
The policy only applies to New Zealand-incorporated banks. A New Zealand branch of an overseas bank is legally part of that bank, and the bank's corporate governance arrangements are a matter for the home country supervisor. But we require branches to publish in their disclosure statements some information on those head office arrangements.
As well as the above requirements focused on board independence, the board must have a separate audit committee (or equivalent) whose mandate must include ensuring the integrity of the bank's financial controls, reporting systems and internal audit standards.
The audit committee must have at least three members, all non-executive and the majority independent, and must have a chairperson who is independent and is not the chairperson of the board.
No person can be appointed as a director or as chairperson of a registered bank unless we have confirmed that we do not object to the appointment. This also applies to certain senior management appointments.
The policy includes guidelines that set out our expectations in matters relating to the integrity, competence and experience of board members in general, and of the audit committee in particular, both collectively and individually.
All registered banks must publish 6-monthly disclosure statements setting out a range of financial and other information about the bank. The information required relating to corporate governance includes:
Overseas bank branches must also disclose this information, in respect of the directors of the bank in the bank's home country of incorporation, and also of the New Zealand chief executive officer.
The disclosure regime also underlines the importance we attach to the role of director by requiring each director to sign an attestation in each quarterly disclosure statement, covering various matters including the bank's compliance with its conditions of registration, and its risk control systems.
Our corporate governance policy 'Corporate Governance (BS14)' from the bank prudential requirements policy documents.