Reserve Bank tracks down leak from lockup to Mediaworks, sees no evidence of market impact

Thursday 14th April 2016

New Zealand's Reserve Bank said its decision to cut interest rates last month was leaked by a Newshub Mediaworks reporter from the media lockup and it will stop offering journalists and analysts embargoed access to sensitive reports as a result. It found no evidence the leak led to any financial market impact.

An independent investigation by Deloitte’s forensic unit found that, contrary to the rules of the lock-up, information on the bank’s decision to cut the official cash rate was transmitted by the reporter to several people in the Newshub office, the central bank said in a statement. The information was then passed on by another person in Newshub, well before the monetary policy statement official release, to an economics blogger who only alerted the bank to the leak after the MPS was officially released, it said.

“The leak is a serious and disappointing breach of many years of trust," Governor Graeme Wheeler said. "It created the opportunity for improper gain on financial markets and damage to the integrity of the bank’s communications. I am extremely disappointed that the information was leaked initially and then communicated more widely.

“The fact that several people outside the bank, who had access to the information improperly, failed to alert the bank immediately, was irresponsible and left open a significant risk that the bank could have closed down quickly with an immediate official release.”

Deloitte was assisted in its investigation by Mediaworks’ legal team, who undertook an internal investigation, and uncovered emails that confirmed the leak, and reported these to Deloitte.

MediaWorks chief executive Mark Weldon, a former head of New Zealand's stock exchange, said the company "unreservedly apologises" to the bank for the incident. The company said the leak was caused by a failure within its news department to follow proper process and changes have already been made. It didn't name those involved or say whether they had been disciplined.

The Reserve Bank has considered alternative arrangements relating to information security however, none completely mitigated the technology and human risks, said head of communications Mike Hannah.

“We have reviewed the procedures of several central banks," he said. "None provide lock-ups for analysts prior to major policy announcements, and the few that provide embargoed lock-ups for media representatives take extensive measures to control the media environment in the lock-up that are not viable for us. Most central banks do not provide embargoed lock-ups.”

From the April 28 OCR review, the bank will issue OCR and MPS statements via its pages on Thomson Reuters and Bloomberg screens at 9am, as is currently the case, followed by release on its website and to email subscribers. For the quarterly MPS and six-monthly FSR reports, the documents will be released at 9am, followed an hour later by a press conference.

“The decision not to provide lock-ups for media or analysts means that these parties will receive the information at the same time as other financial market and public audiences,” Hannah said.

BusinessDesk.co.nz

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