Reserve Bank welcomes Government decision on Bank’s future objectives
The Reserve Bank welcomes the Government’s decisions on its future role and responsibilities as part of Phase 2 of the review of the Reserve Bank of New Zealand Act.
As announced, changes to the legislative framework will be made through enacting two separate Acts to replace the Reserve Bank of New Zealand Act 1989 – an ‘Institutional Act’ and a ‘Deposit Takers Act’.
Under the Institutional Act the Reserve Bank’s main objectives will be:
- achieving and maintaining stability in the general level of prices over the medium term and supporting maximum sustainable employment; and
- protecting and promoting the stability of New Zealand’s financial system.
Other key decisions relate to the establishment of a governance board and the introduction of a Financial Policy Remit from the Minister of Finance.
The key ‘in principle’ decisions on the ‘Deposit Takers Act’ include integrating the regulation of banks and non-bank deposit takers under one deposit taking regime, strengthening the accountability regime for directors and providing the Reserve Bank with a greater range of crisis resolution powers.
Reserve Bank Governor Adrian Orr welcomed the changes: ‘Financial stability is vital in maintaining and improving the wellbeing of all New Zealanders, and the financial stability objective will give greater clarity of purpose. These changes are an important step towards modernising New Zealand’s financial stability framework and the Reserve Bank’s governance and accountability settings.’
The new governance structure provides for a legally empowered Board responsible for the Bank’s functions, other than those undertaken by the MPC. While the Minister of Finance will appoint the Governor, the Board will recommend appointments and be accountable for the Governor’s performance. The Minister of Finance will continue to appoint the Board, in consultation with political parties.
Mr Orr says ‘These decisions strike a balance between maintaining the independence of the Bank and ensuring there is greater transparency and accountability about the Bank’s work.’
The Reserve Bank will continue to work closely with Treasury in overseeing the Review that is jointly resourced by the Treasury and the Reserve Bank. The third and final round of consultation will be launched in early 2020, focusing on the details of deposit insurance and the regulatory regime. We will be engaging industry in the new year to discuss what the changes might mean in practice and to provide further details about the consultation.