'The only balance needed on any board is the required balance of skills, knowledge, experience, and judgement'
The New Zealand government is being urged to drop its "highly questionable approach of seeking gender and ethnic balance" in the Reserve Bank's board amid challenges in the banking competition.
Geof Mortlock, a former senior member of the Reserve Bank's economics department, stressed that there is an urgent need for the government to appoint directors with in-depth knowledge and experience in banking, insurance, and financial stability issues, Radio New Zealand reported.
"In doing so, the government should abandon the highly questionable approach of seeking gender and ethnic balance as the priority for board appointments," Mortlock said as quoted by RNZ.
"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."
'Fundamentally strengthened' Reserve Bank board
According to Mortlock, there is a need for the Reserve Bank board 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 former senior staffer made the suggestion in a submission to the finance and expenditure committee on its inquiry into the banking competition, RNZ reported.
It comes after a report from the Commerce Commission earlier this year found that the banking sector lacks competition, lacking disruptive forces to drive change and deliver benefits.
Strengthening assessment systems
In the same submission, Mortlock also suggested that the Treasury should review the performance of the Reserve Bank, its board, and the monetary policy committee, RNZ reported.
"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," he said as quoted by the news outlet.
According to Mortlock, an independent performance assessment is crucial to improve the evaluation of the Reserve Bank's performance against all its functions, including prudential and monetary policies.
"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," he added.
He also called for a regular independent performance audit on the Reserve Bank, which could take place every three to five years.
"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."