Open government – or the lack of it – has been getting a bit of attention in recent weeks. The previous National-led government was pretty poor in that area, and if anything there now seems to be a risk that the current government could be worse. But at least there is some debate around the issues. Former Cabinet minister, and now Speaker, Trevor Mallard, had one promising suggestion in an article this morning
“Eventually getting some websites going which contain most of that material, for example, Cabinet papers two months after they’ve been to Cabinet automatically up unless there’s a good reason not to, just that sort of stuff would mean you’d have a lot of access to, actually quite boring information, but access to what’s going on.”
Easy to suggest, of course, when you are no longer a minister. I hope the new Speaker will be as keen on extending the provisions of an (overhauled) Official Information Act to cover Parliament itself.
The Reserve Bank is one of the bodies that likes to claim that it is highly transparent. There are plenty of counter-examples – and occasional examples that might suggest that progress is actually being made – but I stumbled across an interesting contrast this week between our central bank and the Bank of England, the central bank of the United Kingdom. Recall that the British public sector was notoriously secretive for a very long time, and our Official Information Act was enacted many years before the UK’s comparable legislation.
In its Financial Stability Report this week, the Reserve Bank released a high-level summary of the results of its latest stress tests on the four major banks. What they released was interesting enough but there wasn’t much of it; 850 words and a couple of charts. There was, for example, no information on individual banks – despite a disclosure-focused system – and no detail on housing mortgage losses – despite the active regulatory and rhetorical focus on those risks for the last five years.
Earlier in the week, the Bank of England released its Financial Stability Report, and as part of that they released their latest stress test results. Their release – on the stress tests alone – was 64 pages, with a great deal of detail, on the test scenarios themselves, on the overall results, and on the results for individual banks. It even has an interesting annex on how markets’ view of banks square with the stress test results.
To be sure, the UK banks are typically more complex than the New Zealand banks (some, such as HSBC, are primarily global banks with big international exposures), and there are more of them (seven in this test) so we might not expect 64 pages of results here. But we really should be entitled to more than the Reserve Bank is giving us. There is no obvious (good) reason for withholding the material – including that at an individual bank level. Disclosure statements are actually already supposed to disclose banks’ risks, and stress tests are just shocks designed to test the circumstances under which those risks turn bad. And, in the end, it is banks (individually) that fail, or not, not “banking systems”.
Sure, there is probably some cost to pulling all the material together and presenting it nicely, but those costs will be trivial compared to the costs the banks face in doing the stress tests, or even than the Reserve Bank faces in conducting them and writing them up for senior management and/or the Board. Accountability provisions and openness do have direct costs – and, for that reason among others, aren’t typically popular with bureaucrats – but we put them in place for good reason. With such large and powerful governments we are long past the days when we could safely accept an approach of “trust us, we know what we are doing”, all the more so when it involves agencies – such as the Reserve Bank – with huge power concentrated in one person’s hands and little direct effective accountability (we can’t vote him out).
I could, of course, lodge an Official Information Act request . If I did they would probably release some more aggregated material. But I wouldn’t get very far, as the Bank continues to shelter – with the protection of the Ombudsman – behind the egregious (or, more accurately, egregiously abused) section 105(1) of the Reserve Bank Act. When the Reserve Bank Act is reviewed, doing something about that provision needs to be on the action list.
If the British can manage this high degree of openness around banking sector stress tests – only a few years after they had to grapple with actual bank failures – surely so can we.