New Reserve Bank governor Adrian Orr tells New Zealand's banks: 'we hear you'

Thursday, 19 April 2018

Reserve Bank governor Adrian Orr has described the central bank's approach to contact with the outside world as 'transactional'.

Adrian Orr, the new governor of the Reserve Bank, has written to the chief executives and chairs of New Zealand's banks alerting them to a damning report fed by their anonymised comments.

An improbable star of New Zealand finance, Orr, 55, started in the role on March 27, arriving at a central bank which he acknowledges is under fire.

'This place is a diamond, but it needs significant polishing in places,' Orr said in an interview in the Reserve Bank headquarters.

'We need to think much harder about how we behave, how we roll, how we explain, how we do things. That's a cultural challenge for the bank.'

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A survey by think tank the New Zealand Initiative, released on April 13, drawing responses from 'some of New Zealand's largest financial institutions' had most respondents claiming the bank's consultation and engagement was poor.

Respondents did not believe management was well-respected, did not find staff constructive and most said the bank did not learn from its mistakes. Verbatim comments from the survey would make for difficult reading for Reserve Bank staff.

'RBNZ [staff are] completely divorced from the reality of how things are done,' one told the survey. Another described the bank as 'archaic', adding that entrenched officials 'don't get challenged'.

Written by NZ Initiative chairman Roger Partridge, a former executive chairman of leading law firm Bell Gully, the report gained limited attention in the days after its release.

But Orr has decided to amplify the message, acknowledging the bank's reputation is below what he believes it could be.

As well as posting the comments of the report on the Reserve Bank's internal intranet, Orr had written to bank bosses with the message that: 'Hey, this doesn't print well. We hear you. We need to do something about it.'

He expected that writing the letter and making public statements would elicit 'free, unsolicited advice about how this place can do better'.

His letter to the chairs of New Zealand's banks will mean he has written to former prime minister Sir John Key, who is now chair of ANZ New Zealand, alerting him to criticisms that Key probably be familiar with.

The approach of the bank to contact with both the media and the organisations it regulated had been 'highly transactional,' Orr said.

'It needs to be more strategic, about building that reputation, targeting the things we want to be world best at, letting other things go.'

Orr has issued public calls for the bank to be engaged in a much wider communication with New Zealand.

While the Reserve Bank's powers are enshrined in legislation, Orr said the organisation would be on 'thin ground' if it relied on this, and needed to communicate better.

'You can't expect expect people to understand us,' Orr said.

'Don't expect to a receive a ticker tape parade down [Auckland's] Queen Street for having maintained low-inflation. People just take that as a given.'

As well as using interest rate mechanisms to control inflation, the Reserve Bank has responsibility for regulating the banking sector.

The former governor, Graeme Wheeler, began introducing rules which restricted how much credit could be given to aspiring house buyers without significant deposits.

But Wheeler, who rarely gave interviews, came under heavy fire for his handling of the communication of the plans, which made getting on the housing ladder more difficult for first time buyers.