The Great Banking Cover-Up Exposed by DownToEarth Kiwi hits the Herald
This blog has long argued it was evasive of the Reserve Bank to blame the private Banks for high profits and throw its weight behind a Commerce Commission investigation when the RBNZ was paying $2-3 billion to those same Banks in interest on their $50 billion account balances (which they hold at the Reserve Bank). The private banks receive the Official Cash Rate of 4.75% on those accounts. Where did the $50 billion come from? The RBNZ's money printing program. Richard Prebble raised the issue in his Herald column (below). Now the Herald has revealed that the Finance Minister is personally unhappy with this state of affairs:
"Documents released to the Herald under the Official Information Act (OIA) show Robertson explored whether the RBNZ could save the Crown money by paying banks less interest on the settlement cash they keep at the RBNZ. The RBNZ currently pays banks interest at the official cash rate (OCR) on their deposits at the central bank, used to settle transactions with each other, the RBNZ and the Crown. The issue, from a public finance perspective, is that program the RBNZ used to lower interest rates in 2020 and 2021 – the Large-Scale Asset Purchase programme and Funding for Lending Programme – saw the balances of banks’ settlement accounts rise seven-fold to $49 billion .. the RBNZ is paying increasing rates of interest (the OCR is 4.75 per cent and expected to rise further) on a large sum of money".
The Official Information Request reveals the RBNZ does not want the situation to change. Maybe its the RBNZ that should be investigated by the Commerce Commission regards its relationship with the private banks. When I used to work at the RBNZ, many economists left the Bank to become Chief Economists at the trading banks. The Chief Economists at those banks are regularly on news and in the papers commenting on crucial economic policy decisions of national importance - yet it would be hard to find a more biased group of commentators with vested interests, since the RBNZ is their regulator (!)