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Crisis management
This page is about our powers under the Reserve Bank of New Zealand Act 2021 and Reserve Bank of New Zealand Act 1989 (the Act) to manage any crisis that might threaten the soundness or efficiency of New Zealand's financial system.
Potential incidents
There are many potential incidents that could directly or indirectly impact the financial system and significantly damage or impede its soundness or efficiency. Such incidents could significantly:
- threaten the system's ability to perform its core functions
- erode public confidence in the system
- reduce the system's resilience.
Examples of incidents that could impact the financial system include:
- a bank failure
- a technical failure of core payment and settlement systems or communication networks
- a failure of other financial market infrastructures
- flow-on effects to the New Zealand financial sector from a natural disaster like an earthquake or from offshore incidents which impact global financial markets.
Our powers under the Act (RBNZ Act 2021 and RBNZ Act 1989)
Our objectives under section 9 of the RBNZ Act 2021 include a “financial stability objective” of protecting and promoting the stability of New Zealand’s financial system.
If an incident occurs that threatens the soundness and efficiency of the financial system, we are charged to manage the incident accordingly by, amongst other things:
- providing liquidity facilities to entities approved by the Bank in order to do either or both of the following:
- manage liquidity in the financial system
- protect or promote the stability of the financial system
- dealing in foreign exchange.
Additional powers to deal with the failure of a registered bank are contained in the RBNZ Act 1989, specifically powers to:
- give directions to banks;
- recommend that a bank be placed under statutory management.
We also have a variety of similar powers under the Insurance (Prudential Supervision) Act 2010 and the Financial Market Infrastructures Act 2021 to deal with the failure of a licensed insurer, or a designated financial market infrastructure that is systemically important.
View the Acts on the New Zealand legislation website:
Open bank resolution policy
Open bank resolution policy (OBR) is a tool we use to manage bank failure should it occur. It supports the objective of avoiding significant damage to the financial system arising from a bank failure.
It achieves this by providing the government with options to help manage fiscal risks and minimise spill-over effects to the rest of the economy by maintaining depositors and/or creditors’ access to their funds.
Under OBR, the failed bank is open for business the next business day from when the insolvency event occurred and can provide depositors access to their accounts and other banking services. In a closed bank resolution, the bank remains closed after the insolvency event, and depositors no longer have access to their bank accounts.
OBR mitigates the harmful effects to the wider economy that arise after prolonged disruption to the payment system when a bank is closed.