Reserve Bank outlines legal basis for its proposed cash standard following push back from banks

The Reserve Bank (RBNZ) says its preferred option for the introduction of its proposed cash standard, through which banks would provide cash services across the country for free, is for the standard to be voluntary. But says it will investigate statutory options under law if necessary.

The RBNZ acknowledges, however, with any regulation it would be up to the Minister of Finance and Cabinet to decide whether it's necessary or desirable.

The RBNZ unveiled its proposed cash standard in February, which would see New Zealand banks providing cash services across the country for free at an estimated annual cost to the banks of $104 million. It comes against a backdrop of banks' gradual removal of services, particularly from rural areas, and associated rising levels of difficulty for people in accessing cash.

Banks and lobbyists promptly slammed the proposal, as "extreme" and a "back to the future solution," with its legality coming into question.

On Friday the RBNZ issued a five-page document on the legal basis for the proposed cash standard.

It says a cash standard would set a floor under the number and location of places where bank customers can withdraw, deposit and swap cash, and mean business and personal customers of any registered bank can access cash withdrawal, cash deposit and cash swap services, with services free, reliable, and available often, and located close enough to where people live.

"There has been strong interest in the consultation with more than 4700 responses so far. We’ve extended the consultation deadline to 31 July 2026 [from April 10] to allow more time for people and industry to respond. No decisions have been made and we welcome a range of views on the proposals outlined in the consultation," Karen Silk, RBNZ Assistant Governor for Money says.

"We received detailed questions about the proposal’s legal basis, so we're publishing additional information to explain it. We expect this will support stakeholders in making well-informed submissions."

"We welcome views from the public, banking and cash industry on the consultation, and further engagement with banks and other cash industry participants will be important when working through how to best implement any proposal. This will be a subsequent conversation, informed by what we hear through the public consultation, alongside our research, analysis and engagement over the past five years to understand the cash needs of the public and if these needs are being met," Silk says.

A contract the 'optimal way'

The RBNZ says "the optimal way" to increase access to cash and to implement the cash standard is via a voluntary standard.

"A contractual basis has advantages over a statutory basis. For instance, the parties can set the rules themselves through negotiation, allowing for considerable flexibility. This could include agreeing options such as jointly owned companies and other arrangements."

It acknowledges the success of a voluntary approach depends on enough banks being willing to participate.

"We do have regulatory options to increase access to cash services, by way of the power to make a standard applying to licenced deposit takers under section 72 of the Deposit Takers Act 2023 (DTA), where the Reserve Bank is satisfied that the standard is necessary or desirable for one or more of the purposes of the DTA."

"A regulation could therefore set out access to cash services as a matter that a standard can relate to. The regulation would set out the types of things that an access to cash standard could regulate, the way sections 78-90 do for the matters they refer to. The regulation would be based on a recommendation of the Reserve Bank, but it would be for the Minister of Finance and Cabinet to decide whether it is necessary or desirable, including, for example, whether the voluntary option is a preferable one," the RBNZ says.

It says its cost estimates are based on banks adopting the most efficient way available to meet the standard, meaning banks acting collectively to provide cash services, such as through a multilateral contract.

"While the collaborative activity exception to the cartel prohibition may apply to an agreement, the agreement would still be subject to section 27 of the Commerce Act, which prohibits arrangements that have the purpose or effect of substantially lessening competition. We recognise that meeting Commerce Act requirements would be a concern for banks and we would support banks through the process. This would include working with the Commerce Commission and seeking an authorisation if necessary," the RBNZ says.