RBNZ: A review of bank liquidity identifies areas for improvement

In its latest review of New Zealand’s banking sector, the Reserve Bank of New Zealand (RBNZ) identifies system, controls and risk management weaknesses.

Key findings

Undertaken review of banks’ compliance with liquidity policy, identifying system, controls and risk management weaknesses.

Compliance with the policy varied amongst banks, but was unrelated to bank size.

Review covered all 15 locally incorporated banks and onsite interviews with the largest ten.

It was positive we found banks are currently maintaining liquidity ratio levels above the regulatory minimums.

Sometimes liquidity positions were more favourably reported by banks than could be justified.

Areas of non-compliance highlighted gaps in these frameworks, suggesting widespread underinvestment in systems and assurance processes.

Plan to commence a review of the liquidity policy in the first half of 2022.