As William McDonough, President of the Federal Reserve Bank of New York and Chairman of the Basel Committee on Banking Supervision, said in March this year, ‘… given the accelerating pace of change and innovation in the financial services industry, our notion of supervision must encompass discipline applied by the marketplace, as well as official supervision.’2 In New Zealand, our notion of supervision relies heavily on marketplace discipline.
Of course, to some extent our approach only works because there is a clear framework of company law which makes it clear that company directors and managers have unambiguous responsibilities. Having agreed accounting rules is important. Having risk-proofed payments systems is important.