UPDATE 2-New Zealand sees no need for Australian-style banking inquiry

Paulina Duran and Charlotte Greenfield

* Review finds no evidence of widespread, systemic issues

* No need for inquiry into New Zealand's financial sector

* Central bank says future research "may test" the view

* RBNZ & FMA "committed" to rigorous review, to report in October (Adds regulator comment)

SYDNEY/WELLINGTON, May 30 (Reuters) - A review of New Zealand's banking sector has found no evidence of systemic problems to warrant an inquiry like one that has rocked the industry in neighboring Australia, financial regulators said on Wednesday.

The heads of the Reserve Bank of New Zealand (RBNZ) and the Financial Markets Authority (FMA) told lawmakers their review of the industry had found areas of concern but nothing like the widespread malpractices uncovered in Australia.

"On the work to date ... I would say we've seen plenty we things that can and should be done better, but we have not seen evidence of what you might call systemic and widespread misconduct," FMA Chief Executive Rob Everett told a parliamentary committee.

The regulators said they had received assurances from the chief executives of 11 banks that issues raised in Australia by the quasi-judicial inquiry - such as abuse of power, deception and fraud - were not "evident" in New Zealand.

However the review was ongoing and the regulators' final report due for release in October "may test" their current view that no commission of inquiry was needed, they added.

The Royal Commission inquiry into Australia's financial sector began in February following a string of scandals involving rate-rigging, money laundering and unethical conduct in wealth management and insurance.

The revelations at the public inquiry, which is just three and a half months into what is set to be a year-long process, have already wiped out billions of dollars from the market value of some of Australia's biggest companies.

Australia's four largest lenders have all been named and shamed in the inquiry, including Australia and New Zealand Banking Group - which operates New Zealand's largest bank through a subsidiary.

Commonwealth Bank of Australia, Westpac Banking Corp and National Australia Bank also own subsidiaries in New Zealand.

The RBNZ and FMA said on Wednesday they remained "committed" to a rigorous review of banks and life insurers.

FMA chief Everett and his central bank counterpart, Governor Adrian Orr, said they would go beyond looking solely for legal breaches and assess whether banks' treatment of customers met "community expectations."

"What we're talking about is trying to encourage better behavior than just the minimum required by the law," Everett said.

(Reporting by Paulina Duran; Editing by Himani Sarkar and Stephen Coates)