2020 Annual Report
Kia orana tātou kātoatoa
This year New Zealand faced an unanticipated, unprecedented health and economic challenge.
By mid-March the scale and economic implications of the COVID-19 pandemic were apparent as we observed an abrupt drop in economic activity globally. The response from the Government, the Reserve Bank and the wider industry was co-ordinated and constructive.
The Bank assisted in cushioning the initial economic blow by promoting cash flow and confidence in the financial system. We acted to maintain monetary and financial stability and offer broad support to the Government, financial institutions and the people of New Zealand.
Our responses included: a significant easing in the Official Cash Rate (OCR) and the introduction of large-scale asset purchases (quantitative easing); the provision of plentiful and cheap liquidity for the banking system; supporting the functioning of New Zealand’s debt markets; ensuring the accessibility of cash; easing regulatory requirements to support lending; and facilitating a variety of Government and industry-led initiatives. A mammoth task was achieved in a short period of time with, at times, limited information.
Our actions throughout this time demonstrated the strength of working collectively and collaboratively with financial services and other regulators.
This approach enabled us to be active, relevant and a cornerstone of New Zealand’s economy and society.
Our Statement of Intent 2019-2022 (SOI), published last year, outlined a number of priorities around four central themes: people and capability; business enablers; stakeholders; and future-focused strategies and innovation.
This Annual Report outlines our activities and progress against these priorities and allows you to hold us to account. Although the COVID-19 pandemic disrupted some of our progress – and we had to take steps to defer a significant number of important, longer-term regulatory initiatives – we still achieved a lot:
- Capital review: We undertook a comprehensive review of our capital frameworks for banks. These frameworks require banks to hold capital buffers to weather adverse economic events and allow them to deploy capital in tough times. Although we delayed the implementation of the new capital requirements, the events of the past few months have strengthened our decisions and highlighted the important roles these buffers play in New Zealand’s financial system.
- Phase 2 Review of the Reserve Bank of New Zealand Act 1989: Alongside the Treasury, we developed recommendations and draft legislation to modernise the Reserve Bank’s governance, operating powers and objectives. The Government introduced the Reserve Bank of New Zealand Bill to Parliament, and work on a Deposit Takers Bill is continuing.
- The Future of Cash – Te Moni Anamata: We undertook significant consultation and policy work on the Future of Cash – Te Moni Anamata programme, which informed the direction of the future cash infrastructure and distribution model.
- Working with others: We agreed a key work programme with the Council of Financial Regulators, which included a focus on financial technology (FinTech), climate change, conduct and culture and financial inclusion. We are grateful for the support in the past 12 months of domestic co-regulators and agencies and for the opportunity to work with central banks in the South Pacific and Asia regions.
- Pacific remittances: We established a Pacific Remittance Project with support from the Ministry of Foreign Affairs and Trade to address challenges facing remittance services domestically and in the Pacific region.
- Te Ao Māori: We continued to embed our Te Ao Māori strategy across the Bank and with our stakeholders. In our latest SOI, we communicated our plans for Te Pūtea Matua in the following 12 months using the Māori legend of Tāne Māhuta. Harnessing diversity, inclusion and collaboration is critical to us reaching our potential and better understanding the economy – so as to best promote the economic wellbeing of all New Zealanders by promoting a sound, efficient and dynamic monetary and financial system.
- Payment and settlement system replacement: We successfully launched a new payment and settlement system, replacing and updating New Zealand’s interbank settlement system and central securities depository, which are responsible for settling more than $30 billion in transactions every day.
- Funding Agreement: In June 2020 we agreed on a new Funding Agreement for the five years commencing 1 July 2020. The Funding Agreement provides a significant uplift in funding, enabling us to address critical risks to the Bank and the financial system and to be both cost effective and fit for purpose into the future.
I would like to thank our Minister, Hon Grant Robertson, and our Board for their unwavering support during the year. We look forward to working with them and with you, our stakeholders, in the years ahead.
I would also like to shout from the rooftop my respect for my colleagues at the Bank who worked professionally and at significant pace while managing through the operational strains of the COVID-19 environment. They did not miss a beat, and then picked up tempo as new policies and tools were implemented and relationships leveraged. A special mention goes to the people who successfully designed and implemented our new payment and settlement system.
At the Bank, we have a vision of being a Great Team and Best Central Bank. This applies to our activities, our people and the way we interact and engage with our stakeholders. We operate transparently and are open to learn and adapt as necessary. Please do continue to assist us by understanding what we do and why, holding us to account and sharing your ideas and expertise directly.
Adrian Orr, Governor
18 September 2020