Adrian Orr took a self-denying ordinance eight weeks ago and took a public back seat on the controversial bank capital debate as criticism from Australian banks, media, former Reserve Bank staffers and even a business think tank threatened to engulf him and fatally puncture his authority.
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It was a timely move, and one the Neil Quigley-led Reserve Bank board had wanted to see. A cordon sanitaire was effectively wrapped around the Reserve Bank governor — and his deputy and an assistant governor thrust forward to continue the public discussion.
Meanwhile, his team worked through the final phase to decide just how the proposals would be mitigated sufficiently to ensure the banks could live with Thursday's announcement.
At issue had been how the open hostilities between Orr and powerful Australian bankers, like ANZ's group boss Shayne Elliott, had not only been ramped up, but had become so sensitised that there was a risk the proposed capital changes could not be introduced without very damaging repercussions to the NZ economy.
The behind the scenes play became obvious to me when at short notice Orr pulled out of a discussion between him and Rob Everett — CEO of the Financial Markets Authority — which I was due to facilitate at this year's Infinz conference.
There was no way the subject du jour of bank capital changes would have been avoided in a discussion focused on the "Regulators' perspective and market reform". Orr knew that and would not have expected otherwise.
The excuse for the no-show was unconvincing.
The event had been billed for weeks and knowing Orr (as I have over several decades) there was no way he would not have shuffled commitments to turn up unless a not-so-subtle choke chain had been applied.
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Attendees at a Reserve Bank parliamentary function later said Orr made a signal suggesting his lips had been sealed when Quigley fronted that event rather than him.
That was possibly the last public act by Orr in the interregnum before this week's announcement.
Assistant governor Christian Hawkesby was a refreshing substitute for Orr at Infinz.
Clearly savvy, he trod a very thin line but nevertheless gave a clear steer when questioned that the central bank had taken the market response on board. Bankers present read that for what it was.
Under pressure, Orr had disclosed a tendency to be somewhat intemperate when challenged. But after a well-earned break, his equilibrium was restored.
The behind the scenes action was made even more interesting by the role that Finance Minister Grant Robertson has played to temper attitudes.
Fur flew when in early July the Herald reported Robertson had told bank bosses during an early morning conference call that while he was under pressure to call a Royal Commission into banking following controversies related to ANZ and its departing chief executive David Hisco, the Government did not believe a Commission was necessary, as bank reform work was under way. But the banks needed to work hard to retain public confidence.
A senior Government press secretary rather futilely started calling around the business community to try to discover who had talked to the Herald.
Put that behaviour to one side — as business does.
It is clear that Robertson has also played a stewardship role in getting towards this week's result.
First, by listening to Orr's public jawboning over the central bank's expectation that the Government would also step up with some fiscal stimulus, and second by foreshadowing that he would do just that by announcing plans next week to step up investment in infrastructure.
Don't expect Robertson or Orr to release minutes from any confidential tete-a-tetes. This has all happened via verbal semaphore. Right?
It's not game, set and match for Orr. Nor for the banks.
But the capital announcement not only gives them more time to raise the additional capital they are required to sequester, but some flexibility over how they get there.
Importantly, Robertson's planned stimulus gives not only Orr, but also the banks, room to move. The downwards trajectory towards even lower interest rates, potentially turning negative, is arrested. The banks have been given tacit permission to raise their lending rates (but not by too much) which again gives them more flexibility to attract and retain depositors.
BusinessNZ and the NZ Initiative are crying out for yet more consultation.
They should take a deep breath.
A review is built into the new capital regime.
Also, any bank that starts "offing" smaller SMES is likely to find itself in a self-defeating situation and a competitive war for customers given that much such lending is backed by physical assets.
In other words, the market will sort it.
The real problem the banks have is to ensure their legitimacy.
The Reserve Bank has released figures showing the big four Aussie banks — Westpac, ANZ, ASB, and BNZ — had the highest return on shareholders' equity last year out of 14 developed countries.
There is no sympathy at Government level for their plight.
In essence, ministers believe the banks have made strong margins and excessive profits from their NZ operations.
Robertson will not say so out loud. But he made the very public point that it "is very important that no bank uses this as an opportunity to target a particular sector ... New Zealand's banks — particularly the four Australian-owned ones — are extremely profitable".
Orr's critics will keep up their chorus of woe.
But with the Australian banks' having tempered their response this week, the only credibility currently at risk is their own.