About the Liquidity Policy Review
In 2022 we began a comprehensive review of our liquidity policy (BS13), known as the Liquidity Policy Review (LPR). The objective of our liquidity policy is to strengthen financial stability by lowering the likelihood of liquidity problems affecting banks and improving their ability to manage such problems.
Our liquidity policy had not been comprehensively reviewed since it was implemented in 2010. Since then, an international liquidity framework has been developed and implemented overseas. There have been several significant developments that support the case for reviewing the policy, including our Liquidity Thematic Review and Liquidity Stress Tests, as well as the COVID-19 pandemic.
Consultation information
In February 2022 we launched our first consultation paper for the Liquidity Policy Review, which set out the proposed issues and scope for the review. It also contained the principles we proposed be used to guide the review and our decision-making.
Respondents to the consultation supported reviewing our liquidity policy at this time. They agreed that given the developments in international practice since our liquidity policy was introduced in 2010, and our recent Liquidity Thematic Review, it was a good time to review the policy to ensure that it remained fit for purpose.
Submitters also generally agreed with the proposed scoping of the review, but asked that we consider the broader prudential landscape, including implementation of the forthcoming Deposit Takers Act, and the potential implications this may have for our liquidity policy. Bank submitters also provided a list of areas of the current liquidity policy that they thought we should focus on.
In response to feedback received, we also amended one of our review principles, to ensure that one of the aims of the review is to promote and facilitate consistent interpretation and implementation of our revised liquidity policy.
Related documents
Liquidity Policy Review - Summary of submissions and key decisions: Consultation paper #1 (PDF 809 KB)
Liquidity Policy Review - Full submissions: Consultation paper #1 (Issues and scoping) (PDF 3.3 MB)
Consultation paper: Review of Liquidity Policy (BS13) (PDF 863 KB)
The second stage of consultation opened in February 2023 and contained proposals on some of the significant policy issues related to the review, including:
- the eligibility criteria for liquid assets
- the potential adoption of international standards, and
- how liquidity requirements could be applied across deposit takers in a proportionate manner.
Feedback on the second stage consultation paper closed on 12 May 2023.
Key decisions
- To retain and modify our policy's existing quantitative liquidity metrics (the Mismatch Ratio and Core Funding Ratio) rather than adopt the international Basel liquidity metrics (the Liquidity Coverage Ratio and Net Stable Funding Ratio).
- To tighten the eligibility criteria for liquid assets under our policy and introduce two categories of liquid assets (Level 1 and Level 2).
Level 1 liquid assets will include cash (notes and coins), Exchange Settlement Account System (ESAS) balances with the Reserve Bank, Reserve Bank bills, and New Zealand Government-issued securities (this includes Treasury bills, inflation-indexed bonds, nominal bonds, and green bonds).
Level 2 liquid assets, subject to a cap on maximum holdings, will include Local Government Funding Agency (LGFA) securities and highly rated Kauri bonds.
- Other assets currently classified as liquid assets under our liquidity policy and eligible for the Reserve Bank’s repurchase (repo) facilities will become eligible for a new Committed Liquidity Facility (CLF), which will be subject to a standing fee.
There was also broad support for our proposal to introduce simplified liquidity metrics for smaller/simpler deposit takers.
Related documents
Liquidity Policy Review - Consultation Paper #2 Submissions (PDF 12MB)
Liquidity Policy Review Consultation Paper #2 (Significant Policy Issues) (PDF 2MB)
In May 2024, we consulted on the Liquidity Standard as part of broader consultation on the core standards of the Deposit Takers Act. This included:
- proposed qualitative liquidity requirements
- proposed modifications to the Mismatch Ratio and Core Funding Ratio metrics
- more detailed quantitative liquidity requirements for smaller/simpler deposit takers, and
- our proposals for liquidity requirements for bank branches.
In stage 3, we sought views on the high-level design features for the Committed Liquidity Facility (CLF). The RBNZ’s Financial Markets Department further consulted on this as part of a parallel piece of work on liquidity management in September 2025.
Consultation on Open Market Operations and the Committed Liquidity Facility
We opened consultation on the exposure draft of the Liquidity Standard in late October 2025.