Government is awash in consultation processes. So much so that “consultation fatigue” is a real term.
But it is a bit odd when an agency consults over a proposal that it may not have the legal authority to implement – when it cannot do the thing that it proposes doing, or at least not without legislative or regulatory changes beyond the agency’s own authority.
The Reserve Bank has been consulting on access to cash services.
It can be a long drive from some very small communities to the nearest ATM. And some small communities only have ATMs for one or two banks’ machines, so being able to make deposits without a drive could require switching banks.
The RBNZ’s consultation paper, Keeping Cash Local, sets out a proposed cash services standard that would require larger banks to maintain far more cash service facilities.
Most people would appreciate having a bank, a café, a decent pub, a library, a bakery and greengrocer within easy reach.
But requiring a nationwide network of 1293 multi-bank, full-service cash sites, including in larger cities, is not free. Much of the cost would wind up falling on bank customers more broadly.
The Reserve Bank did not appear to have the statutory authority to compel banks to do any of it – or at least not without legislative or regulatory changes that the Reserve Bank could not implement on its own.
While the Deposit Takers Act allows standards to deal with other matters prescribed in regulations, that catch-all sits rather firmly in a prudential standards regime. Prudential regulation is about ensuring that banks are sound and that the banking system is safe. It does not regulate bank branches’ hours or locations.
To draw a parallel, the Food Act 2014 sets food-safety standards for restaurants. Trying to use that legislation to compel restaurant chains to open branches in underserved towns would not really work.
So, in early March, I asked the RBNZ to explain the statutory basis for its proposed regulations – as well as background workings. Others made similar requests.
In April, the bank provided a partial information release. And, last week, the RBNZ provided the rest of the requested material.
Last July, RBNZ assistant governor Karen Silk discussed broader cash services with the Minister of Finance. Silk’s note said that “whilst current powers under the act mean we could recoup costs from banks if RBNZ delivered or subsidised service that our real desire was that banks [are] required to deliver (ie we don’t have to do the delivery) which would require legislation”.
Around the same time, the RBNZ provided a presentation to Treasury on the proposal. It noted amendments to the Reserve Bank Act enabling the RBNZ’s proposals could be made in 2027. In the meantime, the Reserve Bank would begin its “moral suasion initiative” and would seek the Minister of Finance’s assistance with that suasion.
In this case, moral suasion means telling commercial banks that if they did not “voluntarily” agree to provide specified services where the RBNZ wanted those services, the RBNZ might provide the service on its own while levying commercial banks to recoup the cost.
A Treasury official noted that the cost of the proposal likely “would fall mostly on bank customers” and wondered whether commercial banks already had commercial incentive to provide services in places where service was warranted.
The same official also asked for clarity on “what is being requested of the Minister of Finance (MOF) by the phrase ‘using the authority of MoF’s office’ to support the RBNZ’s initiative to invite the five largest commercial banks to form a voluntary agreement”.
The term “voluntary” can be a bit strained when the RBNZ was also to be providing advice to the minister on legislative reforms that could enable compulsion.
The RBNZ’s April 2026 paper, Keeping cash local – Legal basis for proposed cash standard, suggested that the RBNZ had stronger authority under existing legislation.
It argued that while the RBNZ preferred “voluntary” measures, if the minister first recommended regulations making cash access a standards matter, the RBNZ could then issue a binding standard.
It would be interesting to see whether that argument stood up to legal challenge. The released materials look uncomfortably like backfilled justification rather than a settled legal basis that guided the policy from the start.
The proposal as it stands is clearly overkill.
A few smart ATMs able to handle cash deposits would handle much of the problem. Switching to the bank that is willing to provide services in rural communities would strengthen banks’ incentives to provide those services.
And where there really is broader national benefit from the provision of services that are not commercially viable, public funding would place the burden on the tax base more broadly – where it belongs.
To read the article on The Post website, click here.
Consultation cannot substitute for authority. If RBNZ wants a cash utility and Parliament agrees, Parliament should authorise and fund it.