Proposed Approach To Liquidity Policy Review Receives Broad Support

The first stage of the Reserve Bank’s Liquidity Policy Review has shown broad support for the review.

The objective of our liquidity policy is to strengthen financial stability by lowering the likelihood of liquidity problems affecting the deposit takers we regulate, and improve their ability to manage such problems.

We launched our Liquidity Policy Review in February 2022 with a consultation on the proposed issues and scope for the review. It also contained the principles we proposed be used to guide the review and our decision-making, Deputy Governor Christian Hawkesby says.

“We received submissions from across the deposit taking sector and we would like to thank submitters for taking the time to provide their views. Respondents to the consultation supported reviewing our liquidity policy now. They agreed that given the developments in international practice since our liquidity policy was introduced in 2010, and our recent Liquidity Thematic Review, now was a good time to review the policy to ensure that it remained fit for purpose,” Mr Hawkesby says.

Submitters also generally agreed with the proposed scoping of the review, but asked that we consider the broader prudential landscape, including implementation of the forthcoming Deposit Takers Act, and the potential implications this may have for our liquidity policy. Bank submitters also provided a list of areas of the current liquidity policy that they thought we should focus on.

In response to feedback received, we also amended one of our review principles, to ensure that one of the aims of the review is to promote and facilitate consistent interpretation and implementation of our revised liquidity policy.

We intend to issue at least three more consultation papers as part of the Liquidity Policy Review, with the second consultation paper due to be released later this year. In response to feedback expressed by stakeholders over the amount of regulatory initiatives currently underway, we have extended the overall review timeline by several months. We welcome engagement with stakeholders throughout the review, and invite any questions or comments on the review to LiquidityPolicyReview@rbnz.govt.nz.

More information

• Review of Liquidity Policy
• Feedback sought on Liquidity Policy Review, February 2022
• Thematic review of compliance with liquidity policy

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