NZ's Willis Sought Meeting on Bank Capital Before Orr Quit RBNZ
Willis also sought advice on her powers to direct the central bank on prudential policy, according to the documents released Wednesday in Wellington.
Bloomberg requested all correspondence between Willis's office, the RBNZ and the Treasury Department in the month before Orr's departure on March 5. The emails and documents released add further fuel to suggestions that Orr resigned amid pressure from Willis for the bank to loosen bank capital requirements, which she has said are pushing up borrowing costs.
Orr is yet to speak publicly about the reasons for his decision to leave less than half-way through his second five-year term. Since he left, the RBNZ has announced a review of the tougher bank capital rules that Orr championed.
Willis requested a meeting with Orr on Feb. 7 'to discuss bank capital settings,' according to emails from her office dated Feb. 3.
The RBNZ responded that Orr was on leave that day and was also 'involved with our forecast week preparations' ahead of the Feb. 19 Monetary Policy Statement.
Willis's office then asked for a meeting on Feb. 5, which was rebuffed, before proposing Feb. 10.
This prompted Orr himself to reply that it would be inappropriate for him to meet with the minister during a period in which he was chairing deliberations on monetary policy.
'The monetary policy week is sacrosanct to the Monetary Policy Committee's independence and deliberately so to protect the Minister — amongst other parties — and NZ's financial reputation,' Orr wrote in an email on Feb. 4. 'This makes meetings during this period difficult, unless urgent and necessary. Please understand I am here to assist but need to act appropriately.'
Orr furthermore said bank capital was a 'wide and long running topic' and there were many in the RBNZ who could assist. 'I am fine to discuss post MPS, or via a written briefing, or via staff outside of the MPC if more urgent,' he said.
Willis was undeterred, and continued to ask for a meeting 'this week or next' to discuss bank capital settings.
Orr replied on Feb. 5, saying he 'won't be able to meet with the Minister to discuss bank capital issues until post the MPS deliberations' but noted he planned to see her on Feb. 17 or 18 for their regular discussions ahead of the rate decision.
He said that the RBNZ board chair and deputy governor should attend any meeting on bank capital, and proposed Feb. 24, which was confirmed by Willis's office later that week.
On Feb. 13, Treasury wrote to the minister's office regarding a question she had about using section 68B under RBNZ legislation.
It said that section gave the government the power to direct the RBNZ on prudential policy, but was replaced by the Financial Policy Remit in 2021.
'Section 68B was rarely used in practice — referred to as 'nuclear option' — whereas the FPR is always in force, which normalizes having Government policy as a regard in prudential standards and strategic intentions set by the RBNZ,' Treasury said in an email that was partly redacted.
Further documents show the RBNZ's five-year funding agreement was also a topic of interest for Willis during February. Willis later announced a less funding for the bank than it had sought from the government.
Not all of the documents requested were released to Bloomberg, and there was no disclosure of what was discussed at the Feb. 24 meeting.
Nine days later, Orr resigned.
More stories like this are available on bloomberg.com
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