Board Chair Professor Neil Quigley says the past year marked a significant turning point in the history of the Reserve Bank with the commencement of the Reserve Bank of New Zealand Act 2021 and a fully empowered governance board. It has been a challenging year for monetary policy, with levels of inflation outside the target range due to international and domestic inflationary pressures.
“The Board’s annual assessment of the Monetary Policy Committee (MPC) was that it has a credible plan for returning inflation to within its target range of 1% to 3% per annum over the medium term, while supporting maximum sustainable employment,” Professor Quigley says.
A highlight of the year was the publication of our Review and Assessment of the Formulation and Implementation of Monetary Policy (RAFIMP). This was a detailed and comprehensive review of monetary policy in the five years from 2017 to 2022.
We also gave advice to the Minister of Finance on the MPC’s remit, following feedback from two public consultations, findings from surveys and public workshops, and analysis of key monetary policy issues. Subsequent to this advice, the Minister of Finance issued a new monetary policy remit and agreed to a new Charter for the MPC.
In accordance with our dividend principles, we did not pay a dividend to the Crown this year. We distribute any capital in excess of what is considered sufficient to cover a prudent range of potential financial losses that may arise in the range of activities the Reserve Bank undertakes, or may need to undertake, across its functions to meet its objectives. We did not have any excess capital under this definition at the end of 2022/23, and the Minister agreed with our recommendation that no dividend should be paid.
It was another significant year for the ongoing shift in our approach to financial regulation and supervision. A highlight has been the enactment of the Deposit Takers Act 2023.
“This new legislation will transform our approach to the regulation of banks and other deposit takers and introduce the Depositor Compensation Scheme. There are many years of work ahead to make sure the new regime works well,” Governor Adrian Orr says.
During the 2022/23 financial year, we requested an amendment to the current funding arrangement which Cabinet agreed to. Subsequently we received a variation to our Funding Agreement to provide additional resources to implement the new regulatory and supervisory regime under the Deposit Takers Act and the Depositor Compensation Scheme. This also provides for further investment in the Bank’s critical infrastructure projects and gives support to under resourced key areas. It is important we make these investments to ensure our people, processes and systems are prepared for the future.
“As the first Annual Report prepared in accordance with the Act, it has new features which I encourage everyone interested in the work of the Reserve Bank to read," Professor Quigley says.
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