Finance Minister Nicola Willis says she has spoken with the Chairman of the Reserve Bank’s board after receiving a letter alleging Governor Adrian Orr breached the central bank’s Code of Conduct.
It's the latest development in an ongoing stoush between the Reserve Bank boss and the New Zealand Initiative, a business-funded think-tank.
It started last week when NZ Initiative Chairman Roger Partridge wrote a newspaper column arguing banking regulations are too strict and are hampering competition in the sector.
The Commerce Commission has raised concerns about bank capital settings, overseen by the Reserve Bank, in its market study into the retail banking sector. The Reserve Bank has pushed back on these.
The rules include the big four Australian-owned banks, which are all members of the NZ Initiative, are required to raise the capital they hold from 10.5% of their risk-weighted loan exposures to 18% by July 2028. That's more than the 16% smaller banks will be required to hold because the big four are deemed systemically important. However, the big four have an advantage in being able to set their own models for measuring credit risk exposure which they must get approved by the Reserve Bank. In contrast smaller banks' capital models are set directly by the Reserve Bank.
The Reserve Bank designed the increased capital requirements to make banks able to withstand a one in 200 year crisis. However, critics argue the settings are too conservative and may result in banks being less willing to lend to higher risk sectors.
The big four, ANZ, BNZ, ASB and Westpac, opposed the higher capital requirements when they were introduced in 2019. The stricter rules are still being phased in.
Orr wrote a letter to the editor of the NZ Herald, which published Partridge’s column, saying the argument was “misleading” and “needed to be called out”.
This letter questioned whether the retail banks shared the NZ Initative’s opinion, or if they didn’t but were willing to sponsor them anyway. Orr also forwarded it to the four banks.
Oliver Hartwich, NZ Initiative’s executive director, wrote a letter to the Minister of Finance and Neil Quigley, Chairman of the Reserve Bank board, alleging Orr had breached the Code of Conduct.
He was unhappy with the language Orr had used in his response, as well as a possible suggestion the column was serving an ulterior motive on behalf of retail banks.
Call in it
Speaking to reporters on Friday, Willis revealed she had received a letter of complaint and that she had phoned Quigley, to discuss it.
“I noted that we had both received the same letter, alleging breaches of the code of conduct, and I reiterated to him that if I was asked about that, I would view that as a matter for him and not for me,” she said.
Willis said she will respond to the letter only to highlight that it was not appropriate for her to be involved in this complaint due to the independence of the central bank.
She said Quigley had been told it was her expectation that the board should take responsibility for all employment matters.
The Reserve Bank’s Code of Conduct says any allegations of breaches would be taken seriously and actions found to be “knowingly in breach” may result in disciplinary action.
Quigley said in a brief statement he had received the letter and wouldn’t be commenting on it at this stage.
The New Zealand Initiative is a public policy research institute that promotes free markets and small government.
Its members include the four big banks as well as: British American Tobacco, Coca-Cola, Air New Zealand, Countdown, Google, NZ Aluminium Smelters, alcohol group Lion, and others.
30 Comments
Well one body has statutory authority as much as it has statutory responsibility.The other is an amalgamated private concern, bordering on lobbying. The context here seems to suggest that the latter is accusing the former of exercising its authority at the expense of its responsibility.
Oh Boy! It is well known that Adrian Orr and Roger Partridge don't exchange Xmas cards. That said, I'm not sure the Governor's letter breaks any code of conduct. It is called a code so no one can decipher it.
If the Initiative has cogent arguments against the Governor's assertions let's hear them.
Initially, I must say, its a cowardice, or devious move by the NZ initiative to complain to his boss if they didn't like the retort.
But, having a skim of RBNZ code of conduct, they're not wrong, he could be pinged for at least 3 expectations in the code of conduct, may well be snookered here.
I agree with RBNZ on almost nothing, but this one I do.
The main 4 banks hold roughly 85% of the retail market and extract massive excess oligopoly profits from the NZ market.
There needs to be 7 banks all with equal market share (14%) for there to be perfect competition. We are so far from that it is a joke.
The last thing we should be doing is listening to the major banks via the NZ Initiative. (The fox is guarding the hen house.)
Given the banks market share, they are a systemic risk and should be treated as such.
If the NZ Initiative had a conscience and was actually into "proper" free markets (rather than monopolies or oligopolies) it wouldn't backing the banks and would be arguing that they are a systemic risk and there needs to be more competition.
how clever to change the name :)
kiwis will never work it out
https://app.companiesoffice.govt.nz/companies/app/service/services/docu…
I don't think it was a secret. I listen to the podcast occasionally and then have openly spoken about the name change.
They seem to be quite disliked here which is strange given the website we're commenting on. I'm usually a Green voter so not exactly right wing, but I normally find their perspective pretty reasonable and well explained, even when I disagree.
Willis showing who she is truly working for here. Lemme guess "Hey Nikki, if you could please give Orr a talking to so that we can milk another few $b before anyone does anything, there will be a cushy chair on one or many of our boards when you retire from politics. Don't worry, we dunnit before with Don Key, nobody says nuffin"
Hey Chippie, that's a total BS mis - statement of Willis's response as clearly explained in the article.
"Willis said she will respond to the letter only to highlight that it was not appropriate for her to be involved in this complaint due to the independence of the central bank."
Unfortunately, NZ can't be relied upon to 'go it alone' in banking. We need the big Aussie banks for security's sake.
Don't forget it was only a few decades ago that we had to sell the then shaky ASB and BNZ......to Australian banks! We should be grateful that they were willing to buy them, although those that can remember those days are still seething that the brokerage on those sales made Fay and Richwhite multi-millionaires.
I am extremely disappointed with the highly misleading headline that Interest has used for this article.
<strong>Nicola Willis raises conduct complaint made against Governor Orr with RBNZ Chairman</strong>
In the body of the article is a rather contrary statement:
<blockquote>Speaking to reporters on Friday, Willis revealed she had received a letter of complaint and that she had phoned Quigley, to discuss it.
“I noted that we had both received the same letter, alleging breaches of the code of conduct, and I reiterated to him that if I was asked about that, I would view that as a matter for him and not for me,” she said.
Willis said she will respond to the letter only to highlight that it was not appropriate for her to be involved in this complaint due to the independence of the central bank.</blockquote>
This is not appropriate journalistic practice.
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