What we do - the Bank and its functions
The Reserve Bank is required to ensure that, throughout the economy, money works as well as possible as a mechanism for making transactions, storing value, and keeping account. The Bank also promotes a sound and efficient financial system. To fulfil these functions, the Bank carries out a wide range of tasks, from operating monetary policy to monitoring and supervising the health of the financial system, maintaining foreign reserves, operating in the financial markets if necessary, and issuing currency as required. To do this, we have defined the vision and values by which we operate.
Responsibility and accountability
The Reserve Bank is required under the Reserve Bank of New Zealand Act 1989 (ss 163-165) to provide an Annual Report, an annual accountability document, to the Minister of Finance no later than 3 months after the end of the financial year. The Annual Report contains a signed statement from the Governor, as well as the Board’s assessment of the performance of the Bank’s functions and the exercise of its powers. It also contains a summary of key activities, and presentation of the Bank’s financial statements.
The Reserve Bank Act requires that price stability be defined in a specific and public contract, negotiated between the government and the Reserve Bank. This is called the Policy Targets Agreement (PTA). The current PTA, signed in September 2012, defines price stability as annual increases in the Consumers Price Index (CPI) of between 1 and 3 percent on average over the medium term, with a focus on keeping future average inflation near the 2 percent target midpoint.
The Reserve Bank is required under the Reserve Bank Act (section 162A) to provide a Statement of Intent (SOI) to the Minister of Finance before the start of each financial year. The SOI sets out the objectives for the next three years and the budget for the first year of that period. The SOI also details the Bank’s strategic priorities for the next financial year.
The Reserve Bank's Funding Agreement is a five yearly agreement between the Governor and the Minister of Finance that specifies how much of the Bank's revenues can be retained by the Bank to meet its operating costs, with the remainder going to the Government.
These papers have been prepared to brief the incoming Minister of Finance on the role and functions of the Reserve Bank of New Zealand. The papers are also intended to be a useful briefing for other interested parties.
Letter from the Minister of Finance to the Governor of the Reserve Bank outlining broad expectations of the Bank's relationship with the Minister and areas of particular interest for the year.
The Reserve Bank is at times a party to Memoranda of Understanding with other organisations, which establish the principles governing how it will work together with those parties.
Click below or on the diagram for further information about how these functions are carried out, and about the structure and services of the Reserve Bank.
Notes on the diagram
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