Reserve Bank reveals Adrian Orr resigned as Governor over ‘distressing’ funding disagreement

Former Reserve Bank Governor Adrian Orr found disagreement over funding "distressing". Photo / Mark Mitchell

The Reserve Bank of New Zealand has confirmed Adrian Orr resigned as governor as he wanted more funding for the central bank than the Government was willing to provide.

The bank said in a statement released under the Official Information Act that its board, chaired by Neil Quigley, conceded a lesser amount of funding was fine.

“This led to Mr Orr’s personal decision that he had achieved all he could as Governor of the Reserve Bank and could not continue in that role with significantly less funding than he thought was viable for the organisation,” the Reserve Bank (RBNZ) said.

“Mr Orr and Professor Quigley entered discussions which led to Mr Orr’s decision to resign. The matter was distressing for Mr Orr.

“Both parties engaged senior counsel to negotiate an appropriate exit agreement. In the circumstances, an immediate departure and special leave for Mr Orr was appropriate, although he agreed to provide handover support.”

Timeline

In September last year, the RBNZ bid for more than $1 billion of government funding for the five years to 2030.

Treasury advised Finance Minister Nicola Willis the proposal didn’t provide good value for money.

In mid-February, Orr wrote to the board to explain why he believed it should push for the funding it believed it needed.

Orr noted the tension between submitting a proposal the Government wanted to hear, versus one that supported the bank’s goals.

“The importance and clarity of operational independence for central banks is judged by global financial markets now and in the future. Not by any current Government,” Orr said.

In late-February, Willis spoke to the Herald about the RBNZ needing to trim its expectations over funding.

Orr resigned on March 5. Nine days later, the RBNZ submitted a more modest bid for $786 million of funding.

Then in mid-April, Willis confirmed the RBNZ’s five-year funding package would total nearly $776m - 8% more than the funding it received in the five years to 2025.

Orr wanted to speak

The documents show there was a lot of planning around Orr’s resignation, with staff referring to it as “Project Baroda”.

However, it ended up being brought forward by five days to March 5 – the day before the bank hosted an international economics conference – as Orr was concerned word of his intention to resign had leaked outside of the organisation.

Orr wanted to stick to the original plan for him to open the conference. He was also willing to discuss his resignation.

“I will proudly open the conference tomorrow morning, noting I am there to discuss today’s news,” he said in an email to the board and two senior staff an hour before his resignation was announced.

Orr didn’t end up attending the conference and hasn’t commented publicly on the matter at all, with Quigley fronting media on the afternoon Orr’s resignation was announced.

Quigley evasive

The Herald asked Quigley, on March 5, about the extent to which Orr’s disagreement with the Government over funding for the bank contributed to his decision to quit.

Quigley responded: “We are working through some views about the funding of the bank. The board is in the process of finalising its submission to the minister about our next funding agreement. That conversation about funding has involved the normal challenge that you would expect and has been constructive, so the board is managing that process.”

Quigley then answered the Herald’s second question about the resignation potentially overshadowing the conference, before saying he wanted to take questions from other journalists.

The RBNZ took weeks to make its original funding proposal public. It is yet to release its updated one.

Willis unimpressed

Willis responded to the RBNZ’s document release, saying she believed it could’ve shared the information sooner.

She clarified she was informed, on February 27, that discussions around Orr’s employment had begun, but it would’ve been inappropriate for her to get involved.

Willis suggested she didn’t actually know, for sure, why Orr resigned.

“While I have always been able to speculate that Mr Orr’s views on funding may have contributed to his resignation, I did not view it as proper for me to speculate on that matter when I was not a party to the employment discussions that led to his resignation,” she said.

Restructure well underway

Since Orr’s departure, a restructuring of the bank’s most senior staff has been completed quickly, ahead of the RBNZ’s new five-yearly funding package applying from July 1.

Under the leadership of Christian Hawkesby – Orr’s former deputy, who is acting governor until a permanent appointment is made – several “assistant governor” roles have been cut.

The restructuring has seen former assistant governors Kate Kolich, Greg Smith, Simone Robbers and Sarah Owen leave.

In the next tier down, the number of “director” roles has also been trimmed from 29 to 20, with the new structure taking effect on June 16.

The RBNZ said it would consult with staff about “potential organisation changes more broadly” later this month.

The number of full-time equivalent staff employed by the bank increased from 255 people in 2017-18 to 660 by January this year.

The RBNZ’s responsibilities expanded over this time, as the Government modernised the legislation it operates under. For example, the bank is standing up a big deposit compensation scheme in July and regulating deposit-takers more tightly.

The RBNZ said Willis’ desire for the RBNZ to require banks to hold less capital than is planned wasn’t a significant factor that led to Orr’s resignation.

Jenée Tibshraeny is the Herald‘s Wellington business editor, based in the Parliamentary Press Gallery. She specialises in government and Reserve Bank policymaking, economics and banking.