Submission on Phase 2 of the Reserve Bank Act review - consultation 3

Phase 2 of the Reserve Bank Act Review is a broad review of the Reserve Bank’s governance and accountability framework and its financial regulatory powers. The consultation document is focused on the prudential framework for deposit takers and depositor protection.

The IoD’s submission focuses on governance-related issues raised in the consultation document and, in particular, proposals affecting the accountability and liability of directors.

The IoD has serious concerns about the proposed new director duties of deposit takers and does not support them in their current form. We are particularly concerned about the lack of clarity and certainty around the interaction between the new proposed duties and director duties under the Companies Act. It is vital that directors are clear about their core duties and how to discharge them. Clarity and certainty is needed at the outset, rather than leaving this to the courts. We have also highlighted a number of other issues with the proposed duties that would need to change. It is critical that there are also appropriate mechanisms to protect honest and diligent directors and these should align with those in the Financial Markets Conduct Act 2013 (ie due diligence defences).

We strongly oppose the proposed prohibition on indemnities and insurance in relation to the new positive duties. There should not be restrictions on indemnities and insurance in circumstances where there hasn’t been deliberate wrongdoing or similar behaviour.