The GFC had many casualties. In New Zealand, one was the former Securities Commission. A 2009 independent review of the Commission’s role in the collapse of the finance company sector signed the regulator’s death warrant.
Out of the Securities Commission’s ashes rose the Financial Markets Authority. Its modern ‘board governance’ arrangements separated the chair and CEO functions that had been combined in the former Securities Commission’s ‘chair’ role. The review identified benefits from “the checks and balances that accompany a split between governance and management.”
Nearly a decade after the Securities Commission’s demise, research from The New Zealand Initiative reveals strong evidence for a similar governance makeover at the Commerce Commission.
Reassessing the regulators: The Good, the Bad and the Commerce Commission derives its findings from an in-depth survey of New Zealand’s top 200 companies. The new study follows up on the Initiative’s 2018 report, Who Guards the Guards? Regulatory Governance in New Zealand.
As in 2018, the survey tracked 23 key performance indicators for 24 regulatory agencies. The KPIs ranged from consistency of decision-making to accountability and learning from mistakes.
The survey reveals a worrying decline in regulatory performance generally. More troublingly, of the three “all of economy” regulators – the FMA, the Reserve Bank of New Zealand and the Commerce Commission – the survey reveals the latter regulator to be a basket case.
On average, only 29.9% of survey respondents agreed that the Commerce Commission met the KPIs, while 38.5% disagreed. These results are in stark contrast to the ratings for the Financial Markets Authority. 58.5% of respondents agreed the FMA met the KPIs. Only 20.2% disagreed.
The FMA’s results have also deteriorated since the Initiative’s previous survey. But the lack of respect for the Commerce Commission is a damning indictment of one of New Zealand’s most important regulators.
Conversely, the survey revealed a dramatic improvement in the RBNZ’s performance as prudential regulator. This improvement follows the focus brought to the RBNZ’s governance from both the Initiative’s 2018 report – which revealed serious shortcomings in the RBNZ’s performance – and the Government’s subsequent three-year RBNZ review. As with the Securities Commission makeover, the RBNZ review culminated in legislation reforming the RBNZ’s governance arrangements as the Initiative recommended in its 2018 report.
In addition to providing grounds for reforming the Commerce Commission, the report recommends strengthening external monitoring of key regulatory agencies and improving the robustness and transparency of regulatory appointment processes.
Regulatory performance matters. Targeting the worst-performing regulators is a good place to start.
Read Reassessing the regulators: The Good, the Bad and the Commerce Commission here