Saturday, 30 March 2013

An Insight Into The New Zealand Debt Management Office

Excerpt from the United Nation Economic and Social Commission for Asia and the Pacific re the structures and influence of the New Zealand Debt Management Office. (please note the information this link did take you to has been removed - but - if you now go to this link it will download a pdf file from the same institution - that on document pg 26 - pdf pg 34 - ESCAP Manual On Effective Debt Management 2006 makes very clear the same structures.
Take special note of the Reserve Bank Of New Zealand only being an agent of the NZDMO;
New Zealand
In New Zealand the Minister of Finance has the power to borrow on behalf of the government. The day-to-day operations arising from this authority have been delegated to the New Zealand Debt Management Office (NZDMO), a unit of the Treasury since 1988. government borrowing and debt management have been the responsibility of this Office, based on guidelines that are approved by the Minister of Finance. The NZDMO is headed by the Treasurer who reports through the Manager of the Asset and Liability Branch to the Secretary to the Treasury, who in turn is responsible to the Minister. The Advisory Board, consisting of private sector representatives, assists the Secretary to supervise the performance of the NZDMO and provides advice on a range of operational and strategic issues.
The objective of the NZDMO is to "maximize the long-term economic return on the government's financial assets and debt in the context of its fiscal strategy, particularly its aversion to risk". It pursues this objective while managing the government's gross borrowing and cash requirements and interest bearing assets within a risk management framework covering the six principal types of risk. It also lends to government organizations and State enterprises and provides advice on capital markets to other branches of the New Zealand Treasury and other government departments and agencies.
(i) Structure and Functions 
The structure of the NZDMO follows that of a private sector financial institution with functions that correspond broadly to those of the front, middle and back offices. It has groups responsible for portfolio management, risk policy and technology, and accounting and transactional services.
The Portfolio Management Group:
  1. Handles the dealing operations of the NZDMO and all borrowings of the government
  2. Manages the government's investment portfolio and cash needs in New Zealand dollars
  3. Finances the foreign currency intervention reserves of the reserve bank
  4. Promotes investment in government securities
  5. Provides advice on capital markets to other government agencies
  6. Manages relations with investors and rating agencies and compliance requirements of international markets
The Risk Policy and Technology Group:
  1. Advises on and continually improves the risk management framework of the NZDMO
  2. Measures the performance of the Office in adding value, measuring risk and monitoring compliance with approved policies for managing the government loan portfolio
  3. Maintains the information technology systems
The Accounting and Transactional Services Group:
  1. Accounts for government loan operations
  2. Prepares debt service forecasts and makes debt service payments arising from government borrowing on time
  3. Ensures that the above are recorded without any security breaches
While the NZDMO is responsible for managing the government's domestic borrowing programme, some administrative functions have been delegated to the reserve bank through an agency agreement. Under this arrangement, the bank is responsible for the tenders and transactions arising from treasury bills and government bonds.
Government Securities Tendering Operations
Page updated 30 Jan 2009 (please toggle down to first pdf Feb 2008 to see how original wording has been altered since new National Party Government was elected Nov 2008)
The original from 7 April 2007 stated this; 
New Zealand Debt Management Office (NZDMO) has assumed responsibility for the tendering of New Zealand Government Bonds and Treasury Bills from the Reserve Bank of New Zealand (RBNZ), which had previously acted as an agent for the NZDMO for many years.
This transfer is solely of the tendering of the primary issuance of government securities and does not include any of the other tendering operations currently conducted by the RBNZ.
From the market’s perspective, little has changed:
  1. Austraclear will continue to be used to place bids and settle successful bids.
  2. The NZDMO will continue to make all decisions on offerings for each tender and on the allotment of bids.
Some changes have been made to simplify the OperatingRules and Guidelines and registration criteria:
  1. Bid limits and bid deposits have been eliminated.
  2. The process for placing telephone bids has been simplified.
  3. The registration process has been simplified.
Registration as a Bidding Counterparty
New institutions wishing to bid in government securities tenders will need to register as a bidding counterparty with the NZDMO.
To qualify for registration as a bidding counterparty with the NZDMO, applicant institutions must have a minimum credit rating of A-/A3, or have their obligations guaranteed by a parent entity with a minimum credit rating of A-/A3, or be a Crown financial institution. Please see Applicationfor Registration as a Bidding Counterparty for further details.

Northern Trust appointed global custodian for New Zealand Debt Management Office
MELBOURNE, January 12, 2009 —Northern Trust today announced it has been appointed global custodian to the New Zealand Debt Management Office (NZDMO). Northern Trust will be responsible for the provision of core custody and related services to NZDMO's book of Fixed Income assets valued at around NZ$4.0 billion.
"NZDMO is a prestigious and significant client in New Zealand, and in the Asia Pacific region overall. A key aspect of Northern Trust's successful tender was the service model and client focus we offer, as well as a commitment to develop and grow our business in the region with large, sophisticated investors," said Jeremy Hester, Head of Business Development for Northern Trust in Australasia. "We are particularly delighted to have the opportunity to work with the NZDMO in building a relationship that delivers significant value to the client."
The appointment follows a comprehensive tender exercise which was completed in July 2008. NZDMO, established in 1988, is part of the New Zealand Treasury and is responsible for the efficient management of the Crown's debt and associated assets within an appropriate risk management framework. NZDMO's strategic objective is to maximise the long-term economic return on the Crown's financial assets and debt in the context of the Government's fiscal strategy, particularly its aversion to risk.
NZDMO's major responsibilities involve:
  1. financing the Crown's borrowing requirement and managing a portfolio of assets and liabilities
  2. disbursing cash to departments
  3. advancing funds to government entities in accordance with government policy
  4. providing capital markets services and derivative transactions for departments and Crown entities.
NZDMO managed $20.5 billion of assets, $36.9 billion of liabilities, $1.0 billion of revenue and $1.7 billion of expenses on behalf of the Crown for the year ended 30 June 2008. More information on NZDMO can be found at
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of investment management, asset and fund administration, fiduciary and banking solutions for corporations, institutions and affluent individuals worldwide. Northern Trust, a financial holding company based in Chicago, has a growing network of 85 offices in 18 U.S. states and has international offices in 15 locations in North America, Europe, the Middle East and the Asia-Pacific region. As of September 30, 2008, Northern Trust had assets under custody of US$3.5 trillion, and assets under investment management of US$652.4 billion. Northern Trust, founded in 1889, has earned distinction as an industry leader in combining exceptional service and expertise with innovative products and technology. For more information, visit
Northern Trust operates in Australia as a foreign authorised deposit-taking institution (foreign ADI) and is regulated by the Australian Prudential Regulation Authority.
Northern Trust in Hong Kong is a securities company regulated by the Securities and Futures Commission.
Northern Trust in Singapore is a foreign wholesale bank regulated by the Monetary Authority of Singapore.
Where Northern Trust's UK entities undertake regulated business, they are authorised and regulated in the United Kingdom by the Financial Services Authority.
o Northern Trust (Guernsey) Limited, Northern Trust Fiduciary Services (Guernsey) Limited, Northern Trust Fiduciary Company (Guernsey) Limited and Northern Trust International Fund Administration Services (Guernsey) Limited are licensed by the Guernsey Financial Services Commission
o Northern Trust International Fund Administrators (Jersey) Limited and Northern Trust Fiduciary Services (Jersey) Limited are regulated by the Jersey Financial Services Commission
o Northern Trust Ireland is authorised by The Financial Regulator under the Investment Intermediaries Act 1995

o Northern Trust Global Services is authorised and regulated in the Netherlands by De Nederlandsche Bank
o Northern Trust Global Services Limited Luxembourg Branch is authorised and regulated by the Financial Services Authority and in Luxembourg by the Commission de Surveillance du Secteur Financier (CSSF) and Northern Trust Luxembourg Management Company S.A. is regulated by the CSSF
o Northern Trust Global Services Limited - Abu Dhabi. Representative Office, Licence number 13/238/2008

1 comment:

  1. Ian its Richard here, it has been a while since we have last spoken, i want clarification on this concept. let me ask ... the NZDMO holds both the assets and debts of NZ, in 2007-2008 i believe the banking sector in new Zealand crashed, and was propped up to quote "restore liquidity in the banking sector" the correlation i wish to clarify regards the mortgages of the homes held in mortgage in new Zealand, firstly are they listed as asset or debt? further more the northern trust seems to be responsible for administrating the nzdmo, so is the nzdmo owned by nz or the northern trust? and if one were default on a mortgage in nz isn't it also true that the banks do not hold individual mortgages, but in fact the nzdmo holds these, and these are in turn administered by the northern trust? if so which branch, and is it private as i expect, is it affiliated with a certain country or family?

    further to this is the statement if you default on your mortgage in new Zealand and the bank forecloses that bank does not own the house, the nzdmo does and since the nzdmo is run by the northern trust is it also true that in this case the northern trust would own the aforementioned house that was defaulted on, and by extension those who own the northern trust own that home?

    hopefully its not t convoluted.