The country's leading banks have been ordered to prove they are not ripping off their customers like their Australian counterparts have been doing.
Photo: RNZ
A royal commission into Australia's financial services sector has found banks have cheated customers and lied to regulators.
The Financial Markets Authority (FMA) and Reserve Bank spoke with the heads of New Zealand banks on Monday seeking concrete evidence the same was not happening here.
"We've asked them to provide reassurances to us that they have scrubbed their business models, and they have a basis for being confident that those issues don't exist here," FMA chief executive Rob Everett said.
Much of New Zealand's financial sector is run by local offshoots of the same organisations now in the gun across the Tasman.
Mr Everett said there was no evidence that what happened in Australia had occurred here.
But he promised that regulators would be asking for more than just the banks' word they had clean hands.
"Our monitoring plan is to check the assertions we've been given and to check that the things we've already seen, and make sure they stack up."
Mr Everett had a warning if the banks did not comply.
"If they do that, they'll see more of us in court."
There is no set timetable for the banks to report back, but Mr Everett expected initial responses in a few weeks.
ANZ Bank was adamant the industry was clean and would stand up to scrutiny.
"They're [regulators] constantly in our business reviewing different areas, and we've said whatever you need to come and have a look at, come and have a look at it," ANZ Bank chief executive David Hisco said.
"We're confident that we don't have the same issues that they have in Australia."
Local banks have been rapped over the knuckles for errant behaviour before.
ANZ, ASB and Westpac paid out more than $25.5 million to avoid legal action from the Commerce Commission over interest rate loans swaps to farmers between 2005 and 2009 that went sour and left thousands out of pocket, with some owing millions.
The FMA had also expressed misgivings about incentives from financial providers that persuaded advisors to offer some products to their clients over others.
There had been few, however, calling for a Royal Commission here.
One of those was Simplicity managing director Sam Stubbs.
"If the industry has nothing to hide they should welcome a inquiry," Mr Stubbs said last week.
"They should all be standing up ... saying let's open the books, let's have the inquiry, so everyone should be able to trust the industry here."
Mr Everett warned it only took one bad apple to irreparably damage the trust needed to manage customers' money, and he urged banks, insurers and their fund managers to get it right.