Request for amount of Government Securities beneficially owned by three major banks

Commercial
Legislation:
Official Information Act 1982
Section 9
Legislation display text:
Official Information Act 1982, ss 9(2)(ba)(i), 9(2)(b)(ii)
Agency:
Reserve Bank of New Zealand
Ombudsman:
Nadja Tollemache
Case number(s):
W2346
Issue date:
Language:
English

Amount of government securities beneficially owned by three major banks as at the end of January 1990—information supplied pursuant to s 36 of the Reserve Bank of New Zealand Act 1989—importance of timely and accurate supply of data—s 9(2)(ba)(i) applied—holdings of Government Stock at specified dates important indicator of liquidity—s 9(2)(b)(ii) applied—public interest in protecting the investing public addressed by the provisions of the Reserve Bank of New Zealand Act relating to prudential supervision

In March 1990, the Ombudsman was asked to investigate and review the refusal of the Reserve Bank to provide details of:

  1. The amount of New Zealand government securities beneficially owned by three major banks as at 31 January 1990;

  2. The amount of New Zealand government securities held by those banks (and their nominee companies) as at a specified date; and

  3. The holdings by the same three banks (and their nominee companies) of 15 February 1995 10 percent government securities at that time on issue.

In respect of the information falling within the scope of request 1, the Reserve Bank refused the request in terms of section 9(2)(ba)(i) of the OIA. The requester advised that the information at issue was provided by banks in the ‘Standard Statistical Return for Financial Institutions’, and that these returns were routinely completed and returned by financial institutions on a voluntary basis. However, it was clear that the Reserve Bank had the power under section 36 of the Reserve Bank of New Zealand Act 1989 to compel the supply of the information, and that it used the information in the returns to calculate monetary policy statistics.

In the circumstances, the Ombudsman accepted that the information at issue in respect of request 1 was ‘information subject to an obligation of confidence or which any person has been or could be compelled to provide’ and that it was ‘in the public interest that such information should continue to be supplied’. However, the Ombudsman had to consider whether disclosure of the information ‘would be likely’ to prejudice the supply of similar information or information from the same source.

The Reserve Bank argued that disclosure of the information would be likely to prejudice the future supply of this and other information in the returns, notwithstanding the Bank’s statutory ability to compel the supply of the information, for the following reasons:

  1. The production of timely and reliable monetary policy statistics is dependent upon the receipt of timely and accurate information from financial institutions.

  2. The Reserve Bank relies on those institutions to put in place the necessary systems to produce information in the form and at the time required.

  3. Financial institutions regard the information as confidential and understand that the information is treated as such by the Reserve Bank.

  4. If the information were disclosed financial institutions would be more guarded about the information they provided about holdings of government stock and other matters covered in the statistical return.

  5. The future supply of information would be prejudiced because of the importance of timely and accurate data.

Given those arguments, the Ombudsman was inclined to accept that the ‘would be likely’ test was satisfied in this case, notwithstanding comments made by the requester to the effect that similar information used to be published in the New Zealand Gazette and that it might be required to be published in a prospectus issued under the Securities Act. Those comments related to the question of whether financial institutions regarded the information as confidential. However, the Ombudsman noted that there were now new methods of prudential supervision and that the practice of publication in the Gazette had been discontinued. Publication in the prospectus was not voluntary and took place when information was no longer current (unlike the information at issue in this request). The information was most sensitive when current.

Accordingly, the Ombudsman did not accept that banks would not be concerned about confidentiality and she formed the preliminary view that section 9(2)(ba)(i) applied to the information at issue in request 1.

In respect of the information relevant to requests 2 and 3, the Reserve Bank argued that: the information at issue would enable a requester to identify the make-up of a bank’s securities portfolio (with regard to government stock); such information was a trade secret (section 9(2)(b)(i)); and that disclosure would place that bank at a competitive disadvantage, both in relation to sales and purchases of government stock and generally, because the information could be used to assess liquidity.

The Ombudsman decided to focus on section 9(2)(b)(ii) of the OIA and noted that it had to be accepted that the information at issue related to the commercial position of the three banks in question. The issues on which she had to form a view were whether the prejudice to the commercial position of the banks ‘would be likely’ to occur and whether any such prejudice would be ‘unreasonable’.

The requester had acknowledged that the amount of government stock held by a bank was an important indicator of liquidity and of financial strength. The figures were therefore a good guide in deciding whether or not to deal with a particular bank. Given the nature of the information and the circumstances in which the information was supplied and held, the Ombudsman formed the preliminary view that the commercial prejudice ‘would be likely’ and that disclosure would be likely ‘unreasonably’ to prejudice that position.

The Ombudsman then had to consider whether, in terms of section 9(1) of the OIA, the withholding of the information was outweighed by other considerations which rendered it desirable, in the public interest, to make the information available. There was a public interest in protecting the investing public, but that issue was addressed by the provisions of the Reserve Bank of New Zealand Act relating to prudential supervision, including the facility under section 81 of that Act to require publication of certain information. The Ombudsman also took account of the Reserve Bank’s comments that:

... it is the banks which are lending the money to government and not the converse. The only exposure to these banks is in respect of the Crown’s obligation to pay interest on the money it has raised ... the banks ... have no call on government prior to the maturity of the stock. The liability of government as at maturity date is already a matter of public knowledge. If the requester is really concerned about how government meets its debts, then rather than pursuing details of the government’s indebtedness to the banks, the requester should, more properly, be examining the ‘books’ of government ... and not those of the banks ... .

The Ombudsman invited the requester’s comments in respect of her preliminary view, but the requester did not take the opportunity to comment. The Ombudsman therefore finalised her investigation and review on the basis that the information had been properly withheld in terms of sections 9(2)(ba)(i) and 9(2)(b)(ii).

This case note is published under the authority of the Ombudsmen Rules 1989. It sets out an Ombudsman’s view on the facts of a particular case. It should not be taken as establishing any legal precedent that would bind an Ombudsman in future.

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