Reserve Bank of New Zealand Bulletin articles June 2012

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June 2012 (Vol. 75, no. 2)

Download the complete issue of the June 2012 Bulletin (PDF 3.5MB)

Articles

Monetary policy in the last business cycle: some perspectives (PDF 1.4MB)
By Willy Chetwin and Michael Reddell

Monetary policy has an important, but limited, role to play in providing a reasonably stable backdrop for real economic activity. Against that standard, the flexible inflation targeting approach that has guided New Zealand’s monetary policy for over 20 years served the country relatively well through some very testing times. The strength and length of the boom – and the associated increase in private debt and asset prices - surprised us, and most other economists. And just how tepid the recovery over the past three years has been is perhaps even more of a surprise.

Bank funding – the change in composition and pricing (PDF 3.2MB)
By Jason Wong

Historically the Official Cash Rate (OCR) has been a good proxy for the cost of funding for banks. However, the global financial crisis of 2007-2009 and regulatory changes have had a significant impact on this relationship. The move towards banks seeking more stable sources of funding like retail deposits and long-term wholesale debt has changed the composition of funding. The price of these more stable sources of funding has also increased, driven by competition for funds and deterioration in funding market conditions. Thus, the cost of funding for banks has increased significantly relative to the OCR. We illustrate this by calculating a notional marginal funding cost indicator. These higher funding costs have been directly passed on to higher mortgage rates.

Anti-money laundering and countering the financing of terrorism – the Reserve Bank’s supervisory approach (PDF 1.3MB)
By Hamish Armstrong

In September 2010, a Bulletin article set out the Reserve Bank of New Zealand’s role and responsibilities with regard to the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (“the Act”). It briefly explained the regulatory and supervisory framework established by the Act, discussed the Reserve Bank’s risk-based approach in this context and outlined some of the major areas of work to be undertaken to develop and implement the Reserve Bank’s supervisory framework.
This article updates material that has been published since that article and provides further detail on the Reserve Bank’s proposed supervisory approach.

For the Record (PDF 2.5MB)

Recent discussion papers, news releases and publications from the Reserve Bank of New Zealand

The views expressed are those of individual authors and do not necessarily reflect official positions of the Reserve Bank of New Zealand. Articles published in this Bulletin may not be wholly or substantially reproduced without the permission of the Reserve Bank of New Zealand. Data, brief extracts from articles, and other material appearing in the Bulletin, may be used without restriction provided due acknowledgement is made of the source.