Reserve Bank Governor Adrian Orr. Photo: RNZ / Cole Eastham-Farrelly
The government should abandon any requirement for the Reserve Bank to have "gender or ethnic balance" on its board, a former senior staffer says - and there should be stronger assessment of its performance.
Geof Mortlock has made a submission to the finance and expenditure committee on its inquiry into banking competition. He was formerly a senior member of the Reserve Bank's economics department.
The inquiry comes after the Commerce Commission's market study into the banking sector, which noted a lack of competition.
Mortlock said the Reserve Bank board needed to be "fundamentally strengthened in terms of the balance of knowledge, skills and experience required to perform its functions".
"It currently lacks directors with the requisite level of knowledge and experience in financial sector regulatory and financial stability issues. It is poorly equipped to do its job effectively, as has been only too evident in reading Reserve Bank annual reports over many years."
He said the government needed to rectify this "as a matter of urgency" by appointing directors with in-depth knowledge and experience in banking, insurance and financial stability issues.
"In doing so, the government should abandon the highly questionable approach of seeking gender and ethnic balance as the priority for board appointments. The only balance needed on any board is the required balance of skills, knowledge, experience, and judgement. Gender, ethnicity, and culture should always be subordinate to these fundamental matters."
Mortlock also said there should be a strengthening of the assessment of the Reserve Bank's performance against all its functions, including prudential and monetary policies.
"This is especially so given the high level of operational independence vested in the Reserve Bank. With such a degree of independence comes the compelling need for greater transparency and accountability.
"Independent performance assessment is crucial for this. Currently, there is little in the way of substantive performance reviews of the Reserve Bank senior management, board or monetary policy committee (MPC).
"Treasury should be given the responsibility and resourcing to review the performance of the Reserve Bank and its board, and the MPC … and to report to the minister of finance and Parliament annually on the results of the performance assessments.
"The assessments should be undertaken on the basis of comprehensive performance metrics that are specified by the minister in relation to the Reserve Bank's full span of functions."
The Reserve Bank has been approached for comment.
Mortlock said there should be an independent review commissioned in relation to the bank's macroprudential policies, capital ratio and bank resolution requirements.
'There should also be regular independent performance audits of the Reserve Bank, desirably every three to five years, and rotating across different functional areas.
"These could be performed either by the Office of the Auditor-General, with outsourcing as needed to engage the required expertise, or by Treasury engaging external appointees. Performance audits should become a key tool in assessing the performance of all government agencies and holding them to account.
"This is just as true for the Reserve Bank as it is for any other government agency; indeed, more so, given the operational independence of the Reserve Bank."
Mortlock said he was making the submission in his role as a financial consultant.
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