ANZ's accident prone Kiwi banking subsidiary has been placed in a regulatory straight jacket by the Reserve Bank of New Zealand, with the bank ordered to appoint independent experts to evaluate its compliance record.The RBNZ revealed on Monday that it has instructed ANZ to institute an independent review of its compliance with current and historic capital adequacy rules and a separate audit of its internal governance and risk management framework.The central bank's action comes a week after David Hisco resigned as chief executive of ANZ in New Zealand over a personal expenses scandal.Hisco exited the plum $NZ3.1 million a year job after the ANZ New Zealand board raised concerns about his personal spending on chauffeur services and the storage of a private wine collection that were claimed as business expenses.The bank is alleged also to have sold a luxury house in Auckland to Hisco's wife at a material discount to its market price.The inquiry into the subsidiary's internal controls could potentially expose other governance breaches that could plunge the bank into a wider reputational crisis. A potential focus of the review could be to assess whether private business transactions between ANZ New Zealand chairman John Key and his former CEO complied with the board's charter and prudential standards of conduct.Key is reported to have sold a multi-million dollar beach house to Hisco while he was a director of the Kiwi business.Pressure is mounting on Key to explain the circumstances around the transaction, which might be seen as having eroded his independent status as an ANZ director and influencing his role overseeing Hisco's performance as CEO.ANZ's governance challenges in New Zealand are now a hot political issue.Deputy Prime Minister Winston Peters yesterday advanced arguments for why Key should resign his position as chair of the New Zealand subsidiary. "I think it's wrong that Mr Key can be head of the ANZ in New Zealand and sit on the Australian equivalent as well. That's a massive conflict of interest," he told TVNZ."I think there's some serious questions that need to be answered, and there's much more to be unearthed in my view."While Peters indicated that any decision on Key's future resided with the RBNZ, he said he would have already sought his resignation if he was governor of the central bank."It's the governor of the Reserve Bank who could make that request," he said."But if you were to ask me if I was the governor of the Reserve Bank I would have asked for his resignation, yes."Prime minister Jacinda Ardern's government appears divided on whether a royal commission is needed to investigate conduct inside New Zealand's Australian-owned banks.While Ardern is advancing an agenda of sweeping reform to the banking industry, she said a royal commission was unnecessary.But Peters disagrees, reiterating his support last night for commission of inquiry into New Zealand's largest banks.As the political storm over ANZ's governance scandal intensified, RBNZ governor Adrian Orr moved to quell suggestions that the independent reviews might be a sign of financial weakness within the