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Review of Liquidity Policy (BS13)

We are undertaking a comprehensive review of our liquidity policy (BS13), to be known as the ‘Liquidity Policy Review’. The objective of our liquidity policy is to strengthen financial stability by lowering the likelihood of liquidity problems affecting banks, and improve their ability to manage such problems.

Note

We intend to issue at least three more consultation papers as part of the review. The second consultation paper will be released later this year.

We are undertaking a comprehensive review of our liquidity policy (BS13), known as the ‘Liquidity Policy Review’. The objective of our liquidity policy is to strengthen financial stability by lowering the likelihood of liquidity problems affecting banks, and improve their ability to manage such problems.

Although we believe our existing liquidity policy remains broadly fit for purpose, it has not been comprehensively reviewed since it was implemented in 2010. Since that time, an international liquidity framework has been developed and implemented overseas. There have been a number of significant developments that support the case for reviewing the policy now, including our recent Liquidity Thematic Review and Liquidity Stress Tests, as well as the COVID-19 pandemic.

In addition, we plan to consider whether our liquidity policy should also capture banks that are operating in New Zealand as branches, and, in due course, how it should apply to a broader set of deposit takers under the upcoming Deposit Takers Act.

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 now. They agreed that given the developments in international practice since our liquidity policy was introduced in 2010, and our recent Liquidity Thematic Review, now 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.

We intend to issue at least three more consultation papers as part of the review, with the entire review spanning approximately three years. The second and third consultation papers will seek feedback on a number of fundamental issues related to our liquidity policy, with a fourth consultation paper expected to contain the proposed final liquidity policy text.

We welcome engagement with stakeholders throughout the review, and invite any questions or comments on the review to [email protected].

Our current Liquidity Policy

Liquidity policy (PDF 745KB)

More information

Liquidity Policy Review - Full submissions: Consultation paper #1 (Issues and scoping) (PDF 3.3MB)

Consultation paper: Review of Liquidity Policy (BS13) (PDF 863KB)

Thematic review of compliance with liquidity policy