A partial backdown from the Reserve Bank

Last week I ran a post about the Reserve Bank’s refusal to release the submissions on the new investor finance restrictions, and in particular the reliance the Bank appeared to be putting on the confidentiality provisions in section 105 of the Reserve Bank Act. Those provisions appear to prohibit the Bank releasing any information  it received from anyone “ relating to the exercise, or possible exercise, of the powers conferred by this Part” of the Act.

As I noted then

This seems like a travesty of democracy. Submissions –  on major new public policy initiatives – can be disclosed to foreign central banks or supervisors, but not to the New Zealand public. Any views banks or members of the public might submit to the Reserve Bank on monetary policy would typically be discoverable under the OIA, but those on prudential matters are apparently not. And this is so, even though for for monetary policy there is a relatively specific objective for which the Governor can be held to account, while there is nothing remotely specific about how the statutory objectives for prudential policy should be measured.


A system in which the Governor can tell us as much, or as little, and then with his own slant, on the submissions he receives should be seen as simply unacceptable.  In this case, quite a simple amendment to the Reserve Bank Act would rectify the situation, making explicit that submissions on proposed changes to conditions of registration, or any other restrictions that affect all institutions, are not covered by the section 105 exemption, and should routinely be published on the Reserve Bank’s website.

And noted that.

Of course, if anyone else wants to request copies of the submissions, the Bank should presumably respond immediately declining their request and explaining why.  Unless they want to reconsider and change their interpretation of section 105, any delay would itself be a breach of the Official Information Act.

I knew then that another request had been made and had not been responded to immediately.

Today, the Reserve Bank has responded to that request, and there has been a major change of heart .

Having told me that it would be too much work to release the papers, that the summary of submissions met the statutory requirements (both laughable arguments), and that in any case much of the each of the submissions would have to be withheld, they have had a (welcome) re-think.  The Reserve Bank has now released in full, on its website, the submissions made by all people and entities who are not banks regulated by the Reserve Bank.

This is a significant step forward. It is probably the first time the Reserve Bank has released any submissions on proposed regulatory changes.  I hope that this now sets a precedent, and to check that I have requested copies of the submissions on the regulatory stocktake.

However, the Reserve Bank is still refusing to release submissions made by banks.  It asserts that these are protected by the confidentiality provisions in section 105 of the Reserve Bank Act.  I describe it as an “assertion” because there is no supporting argument or evidence in the letter to Jenny Ruth as to how section 105 protects bank submissions but not those made by other submitters.  Here is what the Act says:

  • This section applies to—

under, or for the purposes of, or in connection with the exercise of powers conferred by, this Part:

    • (b) information and data derived from or based upon information, data, and forecasts referred to in paragraph (a):
    • (c) information relating to the exercise, or possible exercise, of the powers conferred by this Part.

There is no hint I can see of any legal differentiation between material supplied by banks, and material supplied on the same issue by other parties.

If the Bank has a strong legal case, they should let us see it.  I’m certainly not suggesting that they should break the law and release bank submissions if they are legally prohibited from doing so, although I suspect  that they may be doing so by releasing any submissions at all

Whatever the law currently says, is there a case for withholding bank submissions?  I think the answer is no, and if anything it is much more important that bank submissions are discoverable than that those of other submitters are.  After all, banks are regulated entities and the idea that regulated entities should be able to lobby the regulator in secret, and we (citizens) have no ability to see what arguments they have made goes strongly against the principles of open government.   Those concerns about regulators and the regulated getting too close were what motivated Ross Levine to write an entire book, The Guardians of Finance (which I wrote about here).  If anything, there is probably a case for more material on banks to be made public, as I noted in yesterday’s post, but certainly their submissions on policy proposals should not have legislative protection.

In conclusion, I wanted to make two other observations.

First, the Bank has asserted that the “summary of submissions we’ve published accurately and fully summarises the responses received from banks”.  If that is so, it would certainly be welcome, but as their summary certainly didn’t accurately or fully summarise my submission, we have no reason to be confident as to how they have reported bank submissions.

And second, I received a letter from the Reserve Bank this afternoon attempting to rationalise their refusal to release anything to me when I sought the same material.  Here is what they had to say:

Subsequent to publication of our summary of submissions and response to submissions for our consultation on adjustments to restrictions on high-LVR residential mortgage lending, the Bank received another Official Information request seeking copies of all submissions. The timing of these two equivalent requests is a differentiating factor in the Bank’s responses to these requests.

  • Your request was made prior to us doing the necessary work to collate, assess, and consider our response to the submissions and then publish our summary and response. 
  • The subsequent request, from a newspaper, was made on 24 August, after we had completed our assessments and published the summary and our responses.  

The difference in timing is significant because one of the primary reasons for declining to provide information to you was, as envisaged by section 16(2)(a) of the Official Information Act, that doing so would impair efficient administration due to the need to repeat the work assessing submissions for their primary purpose while also assessing them to respond to your request. With the primary assessment work completed, we do not need to repeat it for the Official Information request made on 24 August. Accordingly, our response to the request we received on 24 August is that we are releasing submissions made to us by individual and by non-bank organisations that we do not regulate,

Again, this simply not persuasive, and appears to be a rather desperate ex post rationalisation for what is clearly a change of view.   For any OIA request, the Bank has 20 working days to respond, and can (and has previously, and regularly, done so) extend that time by another 20 working days if necessary.  There was no need for any repetition, or any disruption to their deliberations (especially as they had openly signalled that they intended to turn the submissions around, and announce the Governor’s decision, quite quickly).

I don’t hold it against people when, having reflected more fully on the issue, they change their minds.  I’ve welcomed the partial step forward reflected in the release of the material today.  But it would best not to pretend that the two requests were so different that they had good legal grounds to refuse my request altogether, but were also legally required to release today’s material .  One decision was a mistake –  hopefully not a wilful one.

As I noted last week about section 105

Like so much about the Reserve Bank Act, it is past time to reform these provisions.  Good access to official information is vital if we are to ensure that such a powerful institution is to be robustly accountable.  At present, there is far too little effective accountability and scrutiny.  A system in which the Governor can tell us as much, or as little, and then with his own slant, on the submissions he receives should be seen as simply unacceptable.  In this case, quite a simple amendment to the Reserve Bank Act would rectify the situation, making explicit that submissions on proposed changes to conditions of registration, or any other restrictions that affect all institutions, are not covered by the section 105 exemption, and should routinely be published on the Reserve Bank’s website.

8 thoughts on “A partial backdown from the Reserve Bank

  1. I enjoy your posts, many of the best I’ve read from the bloggers that I follow.

    You definitely make a better argument for your viewpoint than do the RBNZ. Are you going to seek a review of their decision under the OIA? Would you consider asking some of the banks for their submissions and their views on the RBNZ policy? Perhaps ask for some non-contentious submissions from banks in another area. If you get that, then it shows they can release bank submissions, and then it would be a matter of arguing about the nature of the data being requested.

    I note clause 105) (2) (c) about releasing data – “in statistical or summary form arranged in such a manner as to prevent any information published or disclosed from being identified by any person as relating to any particular person:”. I guess this is why they have published the summary. I wonder how that really differs from releasing the submissions with names redacted.

    Having agreed in general with your position I can see there might be a few areas where information shouldn’t be released, and that would be about competitive positioning of different banks etc. I think that should be freely shared with the RBNZ, but should not be disclosed to the public/competitors. But as the RBNZ are already removing sensitive data from their summary, they should have no problem redacting it from the raw submissions.

    Liked by 1 person

    • Thanks

      I’m going away for a few weeks, so won’t be doing anything for a while, but I don’t think I really can seek a review. They are withholding under the RB Act, rather than the OIA, and on my reading of the RB Act they are right not to release the submissions (any of them). So my problem looks to be with the Act itself, rather than with how the Bank is interpreting it. It looks to be a case where I need to persuade the government to change the law, along the lines of the simple amendment I proposed.

      And, yes, I don’t have a problem with some exceptions for commercially sensitive data – but I’m pretty sure the OIA provides for some of those protections anyway.

      Liked by 1 person

  2. Great work. I’d really like to have access to bank submissions as well, particularly given the increased risk savers, in particular, now have to take on with respect to the OBR. The more we understand their thinking on regulatory policy, the better.

    Liked by 2 people

  3. The thing I do like about Wheelers approach is that he does try to move very fast and does consider industry opinion. When he reached into the macroeconomic toolbox for the LVR restrictions, that was a perfectly good move. When it became apparent that first home buyers were being excluded and new builds was being affected because of it, he loosened the LVR restrictions on new builds.

    The negatives so far that I have seen from Wheeler is that he does harp on too much about property prices without sufficient research into the causes and screams like a panicky schoolchild every time prices head upwards. And he raised interest rates off the back Diary prices which tends to be seasonal and a Christchurch rebuild which was a disaster recovery. Who in their right minds would consider a disaster recovery as a reason to pull the handbrakes. What are you trying to slow down? The rebuild?


  4. The RB needs to look closely at Singapore’s superannuation policy and view superannuation as a tool to increase savings that can be directed to more productive assets which is quite different from savings in a bank which is directed to the property market in the form of higher lending. Labour did propose a VSR. The problem with David Parker was that he was not able to work the numbers to justify why we need a VSR in the RB tool box.

    You have indicated previously as well that the interest impact is faster than a superannuation impact. Lets look at some quick numbers.

    Household disposable income is $150 billion. If we had a similar compulsory super policy as Singapore, a 0.25% increment would affect both employer and employee by 0.25% which means that the effect of a 0.25% change equates to $150billion * 0.5% equates to $750million removed from spending over a 12 month period.

    Household Debt is $250 billion. A 0.25% increment is equal to $675million over a 12 month period. Sometimes I wonder if the RB understands what a 0.25% impact actually means, in terms of how fast they move interest rates up. $625 million is a massive number. I would have thought one OCR move a year is more than sufficient.

    Therefore you need a smaller change in Sperannuation to effect a bigger impact on spending. But the major difference is that you increase savings massively for the general wage earning population with a VSR compared to a interest rate response without the unintended consequence of higher exchange rates that decimate our export companies.


  5. Interest rate increases to dampen spending makes a big assumption that NZ is a highly indebted nation. But that is big LIE. RBNZ stats show that Cash deposits total $276 billion plus investment in bonds and bills total $13 billion. Therefore NZ Households have more liquid assets dependent on higher interest rates than the $250billion in household debt and add consumer loans of $15 billion that totals $265 billion in total household debt.


    Therefore the RBNZ has been misleading/lying to government and to the general public??? A interest rate response does not have any major impact to a NZ household spending at all if we account for the cash deposits. All a interest rate response if have a detrimental impact on the NZD and decimate our building industry that is heavily reliant on development finance.


  6. Good post.

    On an unrelated topic – but relevant to previous blogs of yours – I and many would be interested in your perspective on the Auckland housing market. Unlike many economists you are open to a potential nasty correction in prices there. What do you believe the catalysts would be, the severity, how likely it might be, etc. Publicly no one seems open to it but privately many are but defer on any actual opinions. Obviously off the hip reaction only is fine – just curious.


    • Next year, big question? what will happen to Auckland property?

      1. $1 billion in student infrastructure spend. Record number of students coming boosting Auckland rents. Auckland rents rise 8% this year
      2. $2 billion spendup in Len Brown train set kick off, totalling $10billion in years ahead
      3. $400 million Convention centre and 65 level Sky City hotel kick off
      4. Air NZ transfer ChCh hub to Auckland, tourist numbers 3 million record
      5. Phillipines airline setting up hub in Auckland to bring in record foreign workers and to service 40,000 phillipino already here.
      6. Massive building boom equates, more foreign workers needing places to rent


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