Bay of Plenty Times

De­ci­sion takes heat out of bank is­sue

Cap­i­tal lev­els de­bate ends with less ran­cour than it be­gan

- Hamish Ruther­ford com­ment Business · Finance · Banking · Reserve Bank of India · New Zealand · Wellington, New Zealand · Facebook · German Ministry of Finance · Grant Robertson · Metropolitan Police Service · Beaumont · Paul Goldsmith

Near the end of the Re­serve Bank’s press con­fer­ence on its de­ci­sion to re­quire the bank­ing sec­tor to raise about $20 bil­lion to bol­ster its safety buf­fers, gover­nor Adrian Orr showed a flash of frus­tra­tion.

“I’m prob­a­bly get­ting a lit­tle bit tired of hav­ing to say it,” Orr said, af­ter in­sist­ing, again, that his team was not screw­ing the scrum in favour or against any­one; it was up to the in­di­vid­ual banks to de­cide how to al­lo­cate risk.

Time and again, Orr has faced sug­ges­tions that by con­strain­ing cap­i­tal, the move would cause banks to fo­cus more on low-risk sec­tors — mean­ing hous­ing — at the ex­pense of small busi­ness, con­struc­tion or, most of­ten and most po­lit­i­cally, farms.

This time, fend­ing off ac­cu­sa­tions that his pro­pos­als suf­fered from a lack of in­put from the ru­ral sec­tor, Orr shot back that, as part of ex­ten­sive and ex­haust­ing con­sul­ta­tions, his col­leagues had eaten as­para­gus rolls in wool­sheds.

For ob­servers of the Re­serve Bank, and in par­tic­u­lar the de­bate over cap­i­tal, this was a sign of how far Orr has come, or per­haps, the best ev­i­dence that the gover­nor’s wings have been clipped.

Ear­lier in a year of de­bat­ing the Re­serve Bank’s pro­pos­als, Orr may have shot down ques­tions force­fully, but he now ap­pears to be on his best be­hav­iour.

In re­turn for a fi­nal de­ci­sion which of­fered con­sid­er­able con­ces­sions com­pared to what was pro­posed in De­cem­ber, the banks have also backed off from the shrill warn­ings de­liv­ered a few months ago.

“Today’s an­nounce­ment pro­vides our banks with cer­tainty on the amount and type of cap­i­tal they will need to hold in fu­ture, and brings an end to a ro­bust con­sul­ta­tion,” NZ Bankers’ As­so­ci­a­tion chief ex­ec­u­tive Roger Beau­mont said on Thurs­day.

Ro­bust is an un­der­state­ment.

When Orr came to the cen­tral bank from the Su­per Fund, he ini­tially ac­knowl­edged that it had work to do to im­prove its re­la­tion­ship with the banks, point­ing to feed­back from the sec­tor via a re­port from the New Zealand Ini­tia­tive.

“We need to think much harder about how we be­have, how we roll, how we ex­plain, how we do things,” he told Stuff in 2018.

But by the mid­dle of 2019 the sec­tor was on the verge of war­fare with its reg­u­la­tor, with banks and busi­ness groups lob­bing warn­ings that the move would cost con­sumers, slow the econ­omy and could see banks pull back from lend­ing in New Zealand in a ma­jor way.

Ini­tially it seemed Orr was keen to shock the banks, drop­ping much stiffer than ex­pected pro­pos­als just be­fore Christ­mas.

But in the early part of the year he seemed rat­tled, with nu­mer­ous stories of him be­com­ing con­fronta­tional with those who ques­tioned him.

From time to time the strain ap­peared to show in pub­lic.

At an ear­lier Re­serve Bank press con­fer­ence, Orr re­buked ex­pe­ri­enced Busi­ness­desk jour­nal­ist Jenny Ruth and re­fused to take her ques­tions, an ex­tra­or­di­nary move from an of­fi­cial whose cen­tral job is com­mu­ni­ca­tion.

It was not the only time Orr has pushed back pub­licly at the me­dia, nor was it the strangest.

Back in May at a se­lect com­mit­tee ap­pear­ance, Na­tional’s Paul Goldsmith asked Orr about crit­i­cism he had faced for not giv­ing speeches on mon­e­tary pol­icy, a tra­di­tion of his pre­de­ces­sors.

Orr re­sponded rather rea­son­ably that while he hadn’t, many of his col­leagues had, while the Re­serve Bank pub­lished plenty of its think­ing on its web­site.

But he then went on to com­plain that some of the crit­i­cism he was re­ceiv­ing was per­sonal “and in the era of Me Too, it is so un­nec­es­sary”, go­ing on to ask jour­nal­ists to think care­fully about who they quoted (a sign of frus­tra­tion at the crit­i­cism from for­mer Re­serve Bank of­fi­cial turned blog­ger, Michael Red­dell).

His com­ments were no­ticed by Welling­ton em­ploy­ment lawyer

Steph Dyhrberg, a staunch critic of law firm cul­ture af­ter the Russel Mcveagh scan­dal, who shot Orr down. “Adrian Orr #metoo is about sex­ual as­sault,” Dyhrberg wrote on a Face­book post. “I don’t think it is ap­pro­pri­ate for you to ref­er­ence this in re­la­tion to me­dia crit­i­cism of your per­for­mance of your role.”

As the sub­mis­sions on the cap­i­tal plan came in, the warn­ings of the im­pact on lend­ing were a headache the Govern­ment did not need, at a time when busi­ness con­fi­dence was slid­ing and eco­nomic growth slow­ing.

Min­is­ter of Fi­nance Grant Robert­son both brought the is­sue to a head and helped cool things down, is­su­ing a state­ment vir­tu­ally plead­ing for calm. “I am call­ing on all in­ter­ested par­tic­i­pants to lis­ten to and work with each other con­struc­tively as this work is car­ried out,” Robert­son said in a state­ment.

At the time, the state­ment was taken by many as be­ing aimed at the banks, in par­tic­u­lar ANZ, which in­fu­ri­ated the Bee­hive when it did noth­ing to un­der­mine re­ports that its sub­mis­sion amounted to a warn­ing it may pull back from New Zealand if the cap­i­tal pro­pos­als went ahead.

But Robert­son’s state­ment also ap­peared to in­clude the reg­u­la­tor, sug­gest­ing frus­tra­tion at the bank’s ap­proach to the frac­tious process.

Likely com­bined with in­creas­ing fo­cus on his ap­proach, the gover­nor has taken a far more res­trained ap­proach in the months since.

This week when Orr ap­peared again be­fore MPS, he sig­nalled a fo­cus in 2020 on the con­duct of the in­sur­ance in­dus­try.

When Paul Goldsmith, Na­tional’s fi­nance spokesman, asked Orr if he had any com­ment on his own con­duct or re­flec­tion on his be­hav­iour, Orr sim­ply re­fused to com­ment.

Robert­son is once again urg­ing the reg­u­la­tor and the sec­tor to fo­cus on im­ple­ment­ing the cap­i­tal plan.

With his Govern­ment head­ing into an elec­tion year hop­ing to ar­gue that the econ­omy is — while slow­ing — con­tin­u­ing to de­liver for New Zealand, he will be hop­ing that the re­cent de´tente in the fi­nan­cial sys­tem is en­dur­ing.

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Adrian Orr

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