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Our approach to policy-making

This page describes our approach to making policy for regulated entities. This includes macroprudential policy and policy relating to anti-money laundering and countering the financing of terrorism. 

Overview of our policy-making approach

We updated our statement of policy-making approach in October 2020.

The statement covers our approach to making regulatory policy for:

  • the prudential regulation and supervision of banks and non-bank deposit takers (including macroprudential policy), insurers, and payment and settlement systems

  • banks, non-bank deposit-takers and life insurers relating to AML/CFT.

All other areas of policy development relevant to us, such as monetary policy or policies for market operations, are not captured by the term ‘regulatory policy’. The term also does not capture our approach to supervision or our internal policies and administrative processes.

The Reserve Bank of New Zealand Act 1989 (the Act) currently provides the Governor with responsibility for all our regulatory policy decisions. However, the Reserve Bank of New Zealand Act 2021, will:

  • establish a new governance board responsible for all decision-making (except decisions made by the Monetary Policy Committee)
  • remove the powers of the Governor as sole decision-maker and recreate the role as Chief Executive under direction of the new board.

Read more about the Review of the Reserve Bank Act and new Act

Principles informing our regulatory policy-making

The current overarching objective for our regulatory policy decision-making is to promote the soundness and efficiency of the financial system.

To ensure this overarching objective and any other principles set out in legislation are met, we apply, wherever possible, the Treasury’s model for ‘Best Practice Regulation’.

Our regulatory policy agenda

There are a number of ways in which regulatory policy issues may be brought to our attention. The main ones are:

  • changes in international standards and best practice
  • gaps in, or problems with, existing regulatory policy identified by our staff
  • through engagement with industry and other stakeholders
  • identified emerging risks or trends
  • planned policy reviews
  • government requests (for work where Cabinet would be making a decision).

Significant regulatory policy issues are communicated in our Statement of Intent, which sets out our objectives for the next three years and the budget for the first year of that period.

We are also a member and alternating chair of the Council of Financial Regulators (CoFR). Cross-agency strategic policies are developed within this group and can influence our regulatory policy agenda.

Regulatory impact analysis

We apply the regulatory impact analysis (RIA) framework for all our regulatory policy work. It is a systemic approach for critically assessing the positive and negative effects of proposed or existing interventions. It ensures interventions enhance the welfare of society; that is, total benefits to society exceed total costs.

An RIA approach analyses and compares different options for achieving the same policy objective(s) using:

  • cost-benefit analysis (CBA)
  • cost-effectiveness analysis
  • incentive analysis or a purely qualitative set of criteria (where a CBA may be impractical or unwarranted).

Applying an RIA also allows all feasible options to be properly considered and for meaningful consultation with stakeholders to take place.

The RIA process may not be linear, as feedback from stakeholder consultation may lead to us changing the problem definition and objectives, for example.

Once the RIA is completed, we produce a regulatory impact statement (RIS) summarising the main parts of the RIA process.

Status quo and problem definition

We tend to base our problem definitions for proposed policy changes on:

  • market failure grounds
  • the failure of existing regulatory arrangements
  • the pros and cons of aligning New Zealand standards with international practice
  • improving the efficiency of a current regime.

Where possible, we use a cost-benefit analysis to determine whether the preferred solution will actually bring a net benefit. We will summarise the costs, benefits and net impacts of each option in relation to the status quo.

Objectives and options analysis

Our objectives are typically linked to our overall statutory mandate for prudential supervision and how the identified problem is preventing this mandate from being met. There may be multiple objectives, in which case we will develop a framework for assessing trade-offs among them.

The next phase is the options and impact analysis, which involves us identifying the full range of feasible options that may fully or partially achieve the objectives. This will typically include both regulatory and non-regulatory options and include the status quo projected forward: what would happen if no further action was taken. The alternative policy options are then assessed against this projected baseline.

Consultation and engagement

Consultation is an essential part of all RIA processes and, in particular, supports the transparent, accountable attribute of best practice regulation.

For all significant policy proposals there will be at least one round of formal public consultation, allowing at least eight weeks for formal submissions.

The purpose of consultation is to inform the problem definition and the options or policy proposals. In cases where the options or proposals are substantially changed after considering the responses from an initial round of consultation, we may further engage with industry and this may include a second round of consultation.

Our consultation papers set out the status quo, problem definition, objectives and options being considered.

Following the formal consultation, we release a paper summarising the feedback received and our responses alongside any final policy decisions. We also publish individual submissions we receive when we have the submitters' consent.

Outside of formal consultation periods, we also hold meetings with regulated entities and industry groups representing their sectors to clarify policy positions, discuss industry concerns or discuss implementation of new regulatory policy. This is one of the avenues where we become aware of emerging risks or regulatory policy issues.


Each consultation we undertake should address transitional arrangements and implementation timeframes for any potential policy options. We will consult industry on such timeframes and the reasons behind them. Wherever possible, we seek to implement policy changes in reasonable timeframes and are conscious of compliance costs for industry.

Monitoring, evaluation and review

We are committed to reviewing our existing policies on a regular basis, subject to available resources. In some cases, our governing legislation contains timelines for review. Changes in international best practice may also prompt a review. Our regular engagement with industry and stakeholders allows us to keep track of when reviews of other policies may be beneficial.

Our interaction with other regulatory agencies and government

We collaborate and consult with other regulators and government agencies in our policy work, domestically and internationally. Some of these relationships are formalised in memorandums of understanding (MoUs). Our dialogue with Australian regulators is particularly important as changes to Australian regulatory policy can have substantial effects on New Zealand.

We keep the government informed of our regulatory policy agenda via our regular engagement with the Minister of Finance, sharing consultation papers with the minister’s office before their release, and through our preparation of accountability documents such as the annual Statement of Intent.