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The Reserve Bank of New Zealand said the bank will review its supervisory strategy and take a more intensive approach that would involve greater scrutiny of financial institutions.
Releasing the November Financial Stability Report on Wednesday, Deputy Governor Geoff Bascand said good governance and robust risk management processes within financial institutions are important to maintain long term resilience.
However, recent reviews of banks and life insurers underscored the importance to improve their behavior.
"We are engaging with industry to ensure that they strengthen their own assurance processes and controls," he said. "We have also reviewed our own supervisory strategy and will be taking a more intensive approach, which will involve greater scrutiny of institutions' compliance."
Governor Adrian Orr said financial system vulnerabilities remain elevated and more effort is required to ensure that the system remains resilient over the longer-term.
As the Loan-to-Value Ratio, or LVR, restrictions have been successful in reducing the more excessive household mortgage lending, the bank decided to leave the LVR restrictions at current levels at this point in time, Orr added.
