Reviewing the Reserve Bank Act
Our foundational legislation is the Reserve Bank of New Zealand Act 1989 (RBNZ Act 1989). Under this Act, we are responsible for formulating and implementing monetary policy, promoting a sound and efficient financial system, and carrying out other functions and exercising other powers as set out in the Act.
In 2017, the Government commissioned a comprehensive multi-year review of the RBNZ Act 1989. Its aim was to ensure New Zealand continued to have a modern and fit-for-purpose monetary and financial policy framework for the future.
The review has involved extensive public consultation and was jointly carried out by the Reserve Bank and the Treasury, supported by an independent advisory group.
In 2018, this led to the passing of a new Amendment Act 2018 which created our monetary policy committee (MPC) and added ‘maximum sustainable employment’ as an objective of monetary policy alongside price stability.
Our new Reserve Bank of New Zealand Act
The parts of the 1989 Act relating to our institutional arrangements are in the process of being replaced with new legislation – the Reserve Bank of New Zealand Act 2021. This new Act will update our high-level objectives, functions, governance and funding arrangements, and is on track to commence in July 2022.
Drafting of Deposit Takers Bill underway
The parts of the 1989 RBNZ Act relating to our regulation and supervision of banks will eventually be replaced by a new Deposit Takers Act. It will create a single regulatory regime for all deposit takers and a deposit insurance scheme.
A Bill will be introduced to Parliament next year following publication of an exposure draft for public consultation.
New regime for financial markets infrastructures
We are also transitioning to new legislation that will create an enhanced regulatory regime for financial markets infrastructures (FMIs). These are systems that facilitate non-cash payments and financial market transactions.
The Reserve Bank and Financial Markets Authority (FMA) jointly regulate FMIs and are working together to implement the Act over an approximate 18-month transition period.
We also have powers and functions under 3 other Acts:
- The Non-bank Deposit Takers Act 2013: We act as the prudential regulator and licensing authority for non-bank deposit takers. (The Government is proposing this Act be eventually replaced by the Deposit Takers Act which would create a single regulatory regime for all deposit takers, as well as a new deposit insurance scheme.)
- Insurance (Prudential Supervision) Act 2010: We issue licences to insurers carrying on insurance business in New Zealand and supervise licensed insurers.
- Anti-Money Laundering and Countering Financing of Terrorism Act 2009: We supervise banks, life insurers and non-bank deposit takers for compliance with the Act.
These Acts can be viewed electronically on the New Zealand Legislation website. Regulations made under these Acts can be viewed on the same site.
Our Bulletin series contains articles on legislation and changes that have occurred over time.