A day in the life at the Reserve Bank
The early shift
It’s 5:30am and most people are still snoozing while one of our foreign reserves dealers is already working on the U.S. markets. The Reserve Bank manages the Crown’s foreign currency reserves of approximately $25 billion, so the dealer is bringing a razor-sharp focus to their job. The night security staff are exchanging vital bits of information with the day crew as they control and monitor all people and money entering and leaving the building. Digital Services’ IT staff are doing early morning checks to ensure all infrastructure systems are ready for the day ahead.
At 7:30am, an essential part of the financial infrastructure that the Reserve Bank operates – the Exchange Settlement Account System (ESAS) Real-Time Gross Settlement (RTGS) – opens its helpdesk to assist the banks in settling real-time billions of dollars of transactions each day. ESAS connects the banks a bit like the power lines that connect the national grid to your house; where the parties to a transaction are with separate financial institutions, you need a settlement system that everyone trusts. Soon afterwards, domestic market operations staff start preparations for the Bank’s daily Open Market Operations (OMOs). The Reserve Bank uses the OMO to supply commercial banks with liquidity in currency, or to take surplus liquidity from the banks, by buying or selling government bonds or other financial instruments. In this way, the Bank influences the money supply in the economy.
Financial market analysis and research staff are busy gathering information on overnight events in global markets and the start of trading in New Zealand markets.
Breakfast – morning tea
By now, the Governor has been in his office for several hours, and almost all Bank employees are at work. At 8:30am daily, financial markets staff gather with colleagues from other areas to share the information they’ve gleaned from overseas markets and newsrooms, and to assess the implications.
At 8:30am, the ESAS end-of-day has arrived (that is, the previous banking day), and at 9:30am, the domestic market operations section has announced the OMO. Bids are taken until 9:45am.
If it's Monetary Policy Statement (MPS) release day, journalists are waiting for the 9:00am Official Cash Rate (OCR) announcement. With the release at 9:00am, financial institutions execute trades and journalists from a dozen outlets publish articles. Later in the morning, the Reserve Bank Governor addresses a media conference, with a question-and-answer session broadcast live via the Bank’s website and a number of news sites.
The OCR announcement happens once every six weeks, and is always keenly awaited by markets, commentators, investors and homeowners. The OCR is one of the main tools the Bank uses to maintain price stability so people can have certainty about their saving, spending and investment choices without needing to worry about inflation eroding value over time.
At 10:00am on Mondays, the senior management group meets to share updates on work underway in the coming week, and to discuss internal management issues. At the same time on Mondays, the Economics forecasting and policy analysis teams have their respective weekly meetings to summarise and analyse the past week’s events, and to prepare for the Monetary Policy Committee, which meets 3:00pm on Tuesdays. These meetings provide a forum for lively and rigorous debate. Everyone ensures they have their say!
Around the Bank, other operational departments are providing support for the policy departments and each other. Financial Services staff are paying bills and salaries. NZClear Operations is in full swing, and settlements are being made of local and overseas money market transactions. Huge sums of money are involved (for market transactions, that is, not salaries!). Digital Services people are providing help desk and website support, managing information and records, gathering and analysing data, and providing business continuity services. Communications staff have read the morning media and circulated highlights around the Bank. Meanwhile, they are fielding media and public enquiries, managing projects and issues and the Bank’s speech programme. They may also be writing reports for consideration by the Communications Committee, which meets fortnightly.
Staff in the Oversight teams in the Prudential Supervision department are monitoring the soundness of individual banks, insurers and non-bank deposit takers (NBDTs), administering a variety of prudential requirements while also thinking about and looking for emerging risks within banks, insurers, and NBDTs. The Financial and Operational Policy teams are developing and refining policies to promote the robustness of the financial system. When the Reserve Bank gets its financial system oversight right, people hardly notice – they just keep getting their pay, buying stuff, paying bills, borrowing money or putting it on deposit, making insurance claims, and so on, without having to worry too much about the institutions behind it all.
Meanwhile, the Macro-Financial team is starting to plan the next Financial Stability Report (FSR), a significant report that the Bank publishes twice a year offering its assessment of the soundness and efficiency of the New Zealand financial system. This team uses prudential tools such as loan-to-value restrictions on residential mortgage lending to manage any emerging systemic risks that can develop during boom-bust financial cycles.
Financial System Analysis staff are continuing their day, talking with traders, brokers and market economists about developments in New Zealand’s financial markets.
Staff everywhere are busy writing reports, Board papers, memos, research papers, articles for the Reserve Bank Bulletin, speeches and, of course, minutes of meetings. Risk Assurance and Assessment is finalising an audit of Bank processes and providing legal advice for supplier contracts, while the Human Resources team is finalising another recruitment round and distributing a paper about staff skills and training for discussion by the heads of departments.
An ever-watchful Economics team member has been keenly reviewing Statistics NZ and other agencies’ data releases, and promptly produces a quick assessment (aptly named ‘At First Glance’) for Monetary Policy Committee consumption.
The Reserve Bank really does have a licence to print money, and the Currency team operates an on-demand wholesale currency supply chain to retail banks. This means that, every day, staff manage the logistics of currency movement to and from retail banks. At the same time, staff are processing some of the 30,000 banknotes that can pass through the Bank’s high-speed sorting machines each hour. Notes that are too soiled or damaged are shredded and recycled (into pot-plant holders!). Staff may also be dealing with old currency (pre-Series 6) surrendered by the public; the Bank will always honour the face value of currency it has issued.
During lunch, Reserve Bank staff are out walking, running, shopping, or maybe just eating in-house – an opportunity to share knowledge and network with colleagues. Staff might be in training for the ‘Trot round the Bot’ (Botanical Gardens), an annual walk/run that boasts high staff participation, and one of the highlights of our social calendar. Some days there’ll be a game of indoor netball or soccer against another organisation, or the eagerly awaited games of cricket and soccer against the Treasury - our near neighbour and fierce rival on the sports field. Economics staff may be taking a lunch break somewhere other than Wellington, in-between meetings with business organisations around the country as part of their ongoing information gathering. This process of interviewing senior industry leaders is one of the many ways we keep in touch with, and informed by, those in the business world.
Invigorated by quality food, fresh air and a walk around Wellington’s beautiful waterfront, staff are ready to continue the work of controlling New Zealand’s inflation and keeping the financial system stable.
Meetings continue through the afternoon. The Financial System Oversight (FSO) Committee meets to discuss and make decisions about things to do with regulating and supervising the banks, insurers and NBDTs, macro-financial policy, and the operation of the payment system. The Assets and Liabilities Committee (ALCO) meets monthly to oversee the management and development of the Bank’s balance sheet, including capital, funding, interest rate, currency and liquidity management.
While all this is going on, the Financial Services teams are meeting to ensure ongoing support services, and to arrange and agree a timetable for the forthcoming planning and budgeting round.
The Web team ensures the 3:00pm Reserve Bank statistics release is successfully published on the website. Towards the end of the day, the Communications team circulates highlights of the day’s media reports relevant to the Bank’s interests and a list of the day’s public and media enquiries, so all staff are kept informed.
The late afternoon wind-up
As the end of the day is within sight the pace doesn’t let up. Policy, Financial System Analysis and International and Markets Analysis staff are flat out gathering information and compiling reports.
At 5:30pm, the IT helpdesk closes and the front desk staff leave for the day. The Security team locks the doors at 6:00pm, closing the building to the public. But although the building may be closed, and the majority of staff gone home, a day in the life of the Bank hasn’t quite finished. Some staff are still beavering away on research projects that have deadlines looming; some are preparing for early meetings the following day; some are chatting about issues that came up during the day and still fascinate; the European bond market dealer is still at work, and the Continuous Linked Settlement (CLS) shift starts to ensure that financial system payments continue to run smoothly late into the evening.
Across town at Wellington Airport, two anti-money laundering supervisors land after a two-day visit to assess an Auckland bank’s compliance with the Anti-Money Laundering and Countering the Financing of Terrorism Act (AML/CFT) Act. The Reserve Bank supervises banks, NBDTs and life insurers for money laundering – but we don’t supervise at the level of individual transactions. Our oversight aims to ensure that the entities have sound processes, rules and controls in place that comply with the AML/CFT Act, and that they adhere to them.
The hum of the air conditioning has gone and a quiet permeates the building.
The late shift
Security are doing their rounds of the building to make sure doors are locked, lights and computers are off, and nobody unexpected is still on the premises. Some staff are still catching up on work so as not to miss deadlines. Sometime in the early evening, our European portfolio manager leaves the building, awaiting the early arrival of our US dealer the next day.
However, a core group of staff are working a second shift till late at night. The CLS staff continue to settle foreign exchange transactions until 10:00pm to cover the five-hour window in the world where CLS is open to settle multi-currency foreign exchange transactions (ie. southern hemisphere markets are coming to a close as the northern hemisphere’s day is starting). The Settlement Before Interchange (SBI) on-call help desk is available till midnight. SBI is used to settle retail payments (cheques, EFTPOS, ATM, direct debits/credits etc). Working from home, a member of the Payments Oversight team may need to dial into an international conference call to discuss developments at a global financial market infrastructure.
Finally, the Reserve Bank settles down for the night. That is unless some crisis occurs overnight, and for some people that means their day will start a whole lot earlier.