Finance Minister Willis Cannot Be Telling the Truth. She ordered the RBNZ's Capital Requirements Review, not the Reserve Bank. Why deny it?

Thank goodness the NZ Herald still has one great investigative reporter, Kate McNamara. In her expose yesterday she asked whether Finance Minister Willis interfered in the decision to hold a new Reserve Bank review of the Big Aussie Bank Capital Requirements. We already know the answer. Yet Willis yesterday denied any political interference whatsoever in the Bank's decision to launch (another) Review. She stated in response to McNamara's question, "The minister completely rejects any inference of political interference .. The decision to .. review the Reserve Bank’s capital requirements was made by the Reserve Bank not the minister (although she has welcomed it)” There is overwhelming evidence against.

First, Willis has no idea whether those Capital Requirements are good for financial stability. But the Big Banks want them gone. Second, Willis' own economic advisers want them gone. They are aligned with the Big Banks. Third, when Willis issued a Beehive Press Statement on the morning of 31 March welcoming a new Review designed to lower the Requirements, Orr was still Reserve Bank Governor. His tenure ended 31 March, midnight. Willis' Press Release cut against everything he stood for. Orr was immensely proud of those Requirements. He backed them every step of the way. For Willis to issue that Statement when she did proves she'd already talked with the RBNZ Board about doing a new Review. Fourth, although Governor Orr stepped down on 31 March, an Acting Governor had been standing in for him whilst he was on holiday, Christian Hawkesby. He lacked authority to order the Review and had fully endorsed the existing Requirements. He gave many speeches strongly defending them. He helped design them. He was General Manager of Financial Stability and was hired by Orr. Hawkesby is friends with Orr and they are still in regular contact, I have heard.

Fifth, although you may argue the decision to do the Review came from an order given to Acting Governor Hawkesby direct from the Board, over the head of Orr, Board Chair Neil Quigley had already himself endorsed the Bank's existing Capital Requirements. He wrote that those Requirements were one of Governor Orr's great "achievements" when endorsing him, unanimously with the Bank's Board, for reappointment to a second term as Governor. Sixth, being a weak Board of folks who have little clue about how to engineer financial stability, its members had no views about whether the Requirements were good or not.

The order, delivered to Reserve Bank Board Chair Quigley to review the Big Monopoly Bank Capital Requirements came from Finance Minister Willis. She wants them out. The Board, its Chair, Reserve Bank Acting Governor, and Governor all insisted on retaining them. They had already done a Review, which supported the Requirements. One of those reviewers was an old colleague of mine, Prof David Miles, at Imperial College London, one of the highest ranked Finance Departments in the world. He was on the Bank of England's Monetary Policy Committee. Willis says she "completely rejects any inference of political interference" in the decision to do another Review. That is not true. Sure, the Board is legally bound to consider her views. But she wanted the Review done. The Board did not. The Governor did not. The Acting Governor did not. Willis knows, as Kate McNamara points out, that the Board's Chair, supported by former National Minister Joyce, is asking National to gift 1/4 billion dollars to build a new medical school at Waikato. Willis made the Board Chair and the Reserve Bank Acting Governor, whilst ignoring the full Governor, an offer they could not refuse.