Liquidity thematic review

This report covers the findings from the thematic review of banks’ compliance with the Reserve Bank Liquidity Policy (BS13 and BS13A). The report was published in September 2021.

The purpose of this thematic review was to assess how banks are complying with the Liquidity Policy. We were also keen to gain a deeper insight into banking industry practices relating to the management and monitoring of liquidity risk.

This is the first time we have conducted a review into compliance with the Liquidity Policy since it was introduced in 2010.

What we did

There are 27 registered banks in New Zealand, 15 locally incorporated banks and 12 branches of overseas incorporated banks.  Our review covered all the locally incorporated banks, however only the 10 largest were chosen for onsite interviews.

Our review was conducted in three parts:

  1. All banks submitted answers to two surveys covering the quantitative and qualitative requirements and guidelines of the Policy. A desk-based analysis was performed on the answers and supporting documentation provided by the banks.
  2. Interviews were held with senior management, board members and employees responsible for the implementation, management and oversight of liquidity.
  3. Sample testing of the 10 largest locally incorporated bank’s liquidity calculation data was undertaken while we were conducting interviews.


The review identified a range of system, controls and risk management weaknesses as well as areas of good practice that the industry can learn from.

Banks are currently maintaining liquidity ratio levels above the regulatory minimums, and comfortably above their own internal risk tolerance limits.

All banks demonstrated good practices in the following areas

  • having clear organisational structures for liquidity risk management;
  • using internal limits and measurements beyond the minimum Policy requirements; and
  • monitoring cash positions to understand intra-day liquidity needs

Compliance with the policy varied amongst banks, but was unrelated to bank size. Many of the issues identified were due to weak internal controls and inadequate care in policy interpretation. In general, compliance reflected the maturity of internal risk management frameworks. Areas of non-compliance highlighted gaps in these frameworks, suggesting widespread underinvestment in systems and assurance processes.

Next steps

All 15 banks that participated in the review have received individual feedback.

The 10 largest locally incorporated banks have been required to:

  • develop a remediation plan to address all of the findings set out in their feedback letters; and
  • conduct a materiality assessment of the impacts of the quantitative findings on the liquidity ratios.

Any material non-compliance with the Policy is subject to public disclosure.

All 15 of the locally incorporated registered banks are required to undertake a self-assessment against the findings in this report.

Reserve Bank supervisors will be monitoring the remediation plans and self-assessments.

A review of the Liquidity Policy will commence in the first half of 2022. The feedback from banks and the findings from this review will be considered as part of the Policy review. There will be further opportunity to provide input during the Policy review consultation process.