RBNZ Accidentally Leaked New Stimulus to Financial Firms

New Zealand’s central bank said it accidentally disclosed sensitive information from its latest Monetary Policy Statement to a group of financial services firms before the official publication time last week.

The information was in a letter sent to non-bank financial institutions 45 minutes before the release of the policy statement at 2 p.m. on Nov. 11 in Wellington, the Reserve Bank said in a statement Wednesday. The letter confirmed the RBNZ’s decision to introduce a new round of monetary stimulus in the form of a Funding for Lending Program, but did not contain specifics, it said.

“The limited information contained in the letter is unlikely to have provided anyone with a market advantage, but the Reserve Bank is taking the matter seriously,” it said. Accounting company Deloitte has been engaged to conduct an independent review of the bank’s internal processes.

In its Nov. 11 policy statement, the RBNZ announced that its new lending program will begin offering cheap loans to banks next month to further reduce interest rates to bolster the economic recovery. It also painted a more upbeat economic outlook, prompting a strong rally in the New Zealand dollar. However, the currency was steady leading up to the official 2 p.m. release time.

Advance knowledge of the announcement was unlikely to have been of any market value because the Funding for Lending Program had been well flagged by the RBNZ, said Sharon Zollner, chief New Zealand economist at ANZ Bank in Auckland. “They’d made it clear that the FLP was coming, so I don’t think it would have surprised anyone,” she said.

The Letter

In the letter to financial firms, released by the RBNZ today, Deputy Governor Geoff Bascand discusses the FLP and its potential impacts. “We are using this tool to help ensure a robust recovery of the New Zealand economy,” he writes.

Bascand notes a key concern is that the program will lower funding costs for large banks and leave the non-bank deposit takers, or NBDTs, at a competitive disadvantage, hampering their ability to provide credit to certain areas of the financial system.

“We understand this concern, and hope you draw comfort from our expectation that the FLP will lower funding costs by a similar degree for both large banks and NBDTs,” he writes.

There appears to be nothing in the letter about the RBNZ’s new economic outlook, though one part of it is blanked out.

It is not the first time the central bank has had to deal with the leak of market-sensitive information. In 2016 it was forced to cease holding lockups for media ahead of policy announcements after a journalist leaked its decision to cut interest rates before the official release time.

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