Using our balance sheet to support monetary and financial stability

19 January 2022 03:00 p.m.
Next release
16 February 2022 03:00 p.m.
Reserve Bank of New Zealand

The core functions of the Reserve Bank include the provision of physical currency, using monetary policy to achieve price stability and support maximum sustainable employment, and promoting a sound and efficient financial system. To fulfil these functions, we carry out a wide range of tasks that require us to hold substantial amounts of financial assets and liabilities. These assets and liabilities form our balance sheet, which provides a snapshot of the financial position of the Reserve Bank at a given point in time.

In response to COVID-19 we’ve introduced a range of initiatives to provide additional monetary stimulus and to support the smooth functioning of New Zealand’s financial markets. These initiatives have enlarged our balance sheet from its December 2019 (pre-COVID-19) level of $24.60bn to $89.18bn at the end of December 2021. During the month of December the size of our balance sheet increased by $1.41bn.

The Reserve Bank's Balance Sheet

Assets (NZ$ million) Programme/Purpose Dec-19 Dec-21
NZ Government Bonds Large Scale Asset Purchase - Nominal Bonds - 51,247
Large Scale Asset Purchase - Inflation-Indexed Bonds - 2,960
Early Repurchases 248 -
Non-Market Bonds - Domestic Liquidity 3,512 3,697
Bond Market Liquidity Support - 83
New Zealand Local Government Funding Agency Large Scale Asset Purchase - Nominal Bonds - 1,586
Bond Market Liquidity Support - 126
Crown Indemnity for Large Scale Asset Purchase Programme Large Scale Asset Purchase - 5,149
Cash Lending
Funding for Lending Programme - 6,746
Term Lending Facility - 2,186
Term Auction Facility
- -
Foreign Investment Assets using FX Swaps proceeds Monetary Policy Implementation and Liquidity Management 7,302 2,354
Reverse Repurchases 600 -
Foreign Reserve Management Assets Foreign Reserves 12,383 12,475
Other Assets

554 571
Total   24,599 89,180
Liabilities and Equity (NZ$ million) Programme/Purpose Dec-19 Dec-21
Crown Settlement Account Payment System
3,048 29,618
Bank Settlement Accounts 7,493 44,692
Currency in Circulation 7,557 9,189
Reserve Bank Bills Monetary Policy Implementation and Liquidity Management 1,225 400
Repurchase Agreements - 286
Term Liabilities NZD Financing by The Treasury 1,592 1,401
Other Liabilities   932 849
Equity Share Capital, Retained Earnings and FX Gains/Losses
2,752 2,745
Total   24,599 89,180

Note: The above table is consistent with the R1 figures published on the RBNZ website on 18th January 2022 and includes unaudited financial data.

Special Note: An updated Balance Sheet has been published on 19 January 2022 which separates out the Term Liabilities, which is funding in NZ dollars provided by The Treasury to the Reserve Bank of New Zealand. This is consistent with the disclosure of Term Liabilities per the R1 Balance Sheet.

If you have any questions about the publication please contact [email protected]


The initiatives below have increased the size of our assets in the balance sheet.

We bought NZ Government and Local Government Funding Agency (LGFA) bonds to provide stimulus to the economy and support market functioning

We bought NZ Government Bonds, Local Government Funding Agency Bonds and, NZ Government Inflation-Indexed Bonds, as a part of a Large Scale Asset Purchase (LSAP) programme. We halted additional asset purchases under the LSAP programme on 23 July 2021 as per the decision made by the Monetary Policy Committee on 14 July 2021. The Committee agreed that further asset purchases under the LSAP programme were no longer necessary for monetary policy purposes. The LSAP programme remains an important tool for supporting the efficient functioning of the New Zealand debt market if required, and remains an important monetary policy tool if needed. At the end of December, we held $54.21bn in Government Bonds and $1.59bn in LGFA bonds under the LSAP programme.

The Crown has agreed to indemnify the Bank in respect to financial losses associated with the LSAP programme. Under the letter of indemnity issued by the Minister of Finance, the Crown will reimburse the Bank for any net losses from the LSAP programme and, conversely, any surplus from the programme must be paid to the Crown. If, for example, we have net mark-to-market losses from LSAP bonds, we will have a corresponding receivable from the Crown, which will be accounted for as an asset in our balance sheet. Movements in this balance have no impact on the consolidated Crown balance sheet, as they are claims between the RBNZ and the Crown.

As at December 2021, we had a Crown indemnity balance for the LSAP programme of $5.15bn on the asset side of our balance sheet. This is due to mark-to-market losses on our LSAP bond holdings driven by the increase in market bond yields. We expect the Crown indemnity balance to fluctuate in line with market movements.

We introduced a Bond Market Liquidity Support (BMLS) programme to bolster the functioning and liquidity of the NZ Government and LGFA bond markets. The programme complements our activities above by allowing us to purchase small amounts of bonds at short notice, to provide confidence to market participants. At the end of December, we had bought $83mn in Government Bonds and $126mn in LGFA bonds through the BMLS.

As part of our Non-market bonds – Domestic Liquidity portfolio, we hold a proportion of every Government Bond on issue to use in our Open Market Operations and Bond Lending Facility, where we act as a lender of last resort. This is part of our normal operations and differs from temporary asset purchase facilities such as LSAP and BMLS. At the end of December, we held $3.70bn of NZ Government Bonds in the portfolio.

We’re ensuring banks can access enough cash to keep lending at low interest rates

In December 2020, we introduced a new longer-term funding scheme for banks called the Funding for Lending Programme (FLP). FLP aims to lower the cost of borrowing for businesses and households, thereby supporting economic activity and employment, and helping keep prices stable. At the end of December, banks had drawn down $6.75bn through the FLP.

We pre-emptively reinstated our Term Auction Facility (TAF) in March 2020, which was last used during the Global Financial Crisis as a way to alleviate pressures in funding markets and to provide banks with an alternative source of longer-term funding (up to 1 year term).

The final tenders for TAF were held on 16 March 2021, as financial market and liquidity conditions had improved significantly since March 2020 and the demand for special facilities had fallen. There was no outstanding balance for TAF at the end of December 2021.

In May 2020, we introduced a longer-term funding scheme for banks called the Term Lending Facility (TLF) in support of the Government’s Business Finance Guarantee Scheme (BFGS). The purpose is to allow banks to access low-cost funding so they can lend to businesses at low interest rates. At the end of December 2021, banks had drawn down $2.19bn through the TLF.

The Government closed the BFGS on 30 June 2021 and the TLF was subsequently closed following the completion of the final scheduled facility window on 28 July 2021.

We increased the Crown overdraft facility to assist with the potential for larger-than-usual fluctuations in Crown cash flows

We provide a Crown overdraft facility to help the Government manage short-term fluctuations in its cash flows. We temporarily increased the overdraft from $5bn to $10bn for a three month period to 1 July 2020, to assist with the potential for some larger-than-usual changes in cash flows. The overdraft facility was utilised for a short period coinciding with the Government’s April 2020 bond maturity, and the account has since been replenished following the issuance of additional bonds and Treasury bills.

We manage the amount of cash in the banking system to ensure that payments can be settled and interest rates remain near the OCR

We initially injected large amounts of NZ dollars (in exchange for other assets) to meet increased demand for cash in the banking system. Our NZ dollar lending through the foreign exchange (FX) swap market saw our foreign currency assets increase from $7.30bn in December 2019 to $18.67bn during March 2020, but this has since reduced to $2.35bn in December 2021 as increased cash level in the banking system reduced the need for FX swap activity.

We hold foreign currency reserves to provide us with the capability to affect the NZ dollar exchange rate

We are responsible for managing dysfunction in the foreign exchange market and in the financial system. We can also, in some circumstances, use foreign exchange intervention as a monetary policy tool when there is significant divergence in the New Zealand dollar from its fair value. These responsibilities require us to maintain a portfolio of foreign currency reserves. There has been no specific need to use the foreign reserves to affect the exchange rate recently. At the end of December, our foreign reserve management holdings made up $12.48bn of our assets.


The initiatives above and below have also seen changes to our liabilities in the balance sheet.

We provide the Government with an account that it uses to deposit surplus funds

If the balance in the Crown Settlement Account (CSA) is positive, our balance sheet shows a liability. If the Government is overdrawn, the overdraft is an asset on the balance sheet (see overdraft facility above). The positive CSA balance was $29.62bn at the end of December.

We provide banks with accounts to settle inter-bank payments

Banks in New Zealand also hold accounts with us and use these accounts to settle inter-bank payments. These accounts cannot be overdrawn unlike the CSA.

We influence the total size of banks’ settlement account balances when we conduct our operations. For example, when we purchase bonds from banks through our Large Scale Asset Purchases (outlined above), banks deposit the cash proceeds back into their settlement accounts at the Reserve Bank. As we purchase more bonds, this results in an increase in the amount of assets on our balance sheet, but also increases the amount of liabilities (i.e. deposits) that banks leave with us (as we have replaced their bond holdings with cash).

At the end of December 2021, the banks’ settlement balances were $44.69bn, compared to $7.49bn in December 2019. 

We supply New Zealand dollar notes and coins

We are the sole supplier of NZ dollar banknotes and coins. Currency is a liability on our balance sheet because banks that deal directly with the Reserve Bank to buy physical currency can return it to us in exchange for a deposit in their account at the Reserve Bank. Our currency liabilities initially increased by $0.8bn from $7.2bn in February 2020 as banks filled ATMs in preparation for potential disruptions to supply chains ahead of the COVID-19 lockdown. At the end of December 2021, our currency liabilities were $9.19bn.

Equity acts as a buffer against potential losses from our operations

The difference between our total assets and liabilities makes up our equity on the balance sheet. Our equity is held by the Crown and acts as a buffer against the potential for losses arising from our operations. We pay dividends to the Government when our profits cause our equity to rise above what we need to hold in reserve as a buffer. At the end of December, our equity made up $2.75bn of our liabilities.

As stated in our annual report for 2021, the Reserve Bank retained realised earnings in 2019/20 to increase our capital buffer and to provide additional financial flexibility to take further actions to meet policy objectives.  Although we reported a loss, a portion of the earnings realised in 2019/20 and earning realised in 2020/21 are available to pay to the Crown in accordance with our dividend principles. A $140mn dividend has been paid to the Crown.

For the latest news and data about our operations, and the development of the Reserve Bank’s balance sheet see:

Monthly summary of our balance sheet (position as at month-end). We present the positions in three different ways:

For more detail about our operations in foreign currency and resulting positions see F5 - Reserve Bank foreign currency assets and liabilities.