Cullen is asked to 'please explain' remarks

A "please explain" letter has been sent to Finance Minister Michael Cullen by the Financial Services Federation.

Executive director Justin Kerr wants clarification of Cullen's recent comments suggesting that regulations covering non-banking financial institutions "clearly need overhauling and updating".

The federation's 46 members, including GE Money, Hanover Financial Services, UDC Finance and Baycorp Advantage, hold assets exceeding $14 billion.

Kerr points out that the term "non-bank financial institutions" is broad and that Cullen's comments did not appear to have any context.

"I really want a bit of clarification," he said. "We just want to find out what he had in mind."

Cullen, who was speaking at Wellington during a joint press conference with Australian Treasurer Peter Costello, went on to say New Zealand was well behind Australia in this area of regulation.

Cullen and Costello were discussing their Governments' movements towards a single transtasman economic market.

"There is a need for us to address that issue of the broader regulatory regime around financial institutions, probably within the context of this transtasman movement," Cullen said.

The Australian Prudential Regulation Authority regulates that country's financial services sector. Here, the Reserve Bank supervises banks and the Ministry of Economic Development (MED) oversees finance companies through the Securities Act and Companies Act.

A Securities Commission report on expectations for disclosure by finance companies is due this month. It follows criticism by the commission and industry-wide consultation last year.

Kerr said he was unaware of any suggestion that a review of the way finance companies were overseen via the Securities Act was needed.

The questions about disclosure were "ongoing maintenance work" whereas "regulatory deficiencies is a rather wider concept".

Kerr has yet to hear back from Cullen.

* MED is considering consolidating reviews covering insurers, credit unions, financial intermediaries and the Securities Act.