Reserve Bank of New Zealand

Reserve Bank of New Zealand logo

RBNZ headquarters in Wellington

Headquarters

Wellington, New Zealand

Coordinates

41°16′44″S 174°46′30″E / 41.278814°S 174.77503°ECoordinates: 41°16′44″S 174°46′30″E / 41.278814°S 174.77503°E

Established

1934

Governor

Graeme Wheeler

Central bank of

New Zealand

Currency

New Zealand dollar
NZD (ISO 4217)

Reserve requirements

None

Interest rate target

2,00% (OCR)

Interest on reserves

Website

www.rbnz.govt.nz

The Reserve Bank of New Zealand (RBNZ) is the central bank of New Zealand. It was established in 1934 and is constituted under the Reserve Bank of New Zealand Act 1989.^[1] The Governor of the Reserve Bank is responsible for New Zealand's currency and operating monetary policy. The Bank's current Governor is Graeme Wheeler. Employees of the bank operate under the framework of a managerial hierarchy.

The Reserve Bank of New Zealand does not offer financial services to the public nor does it offer deposit insurance, and its website refers people to other financial institutions.

Ownership

Unlike the United States Federal Reserve, the Reserve Bank does not have elements of private ownership; according to its website, "The Reserve Bank does not have shareholders. It is 100% 'owned' by the New Zealand Government, with any extra revenue that the Reserve Bank makes going back into the Crown accounts. The Central Bank is not a government department, but is a body corporate whose finances are included in the Crown accounts."

Monetary policy

Primary Functions

The Reserve Bank's primary function, as defined by the Reserve Bank of New Zealand Act 1989 is to provide "stability in the general level of prices."^[2]

The Reserve Bank is responsible for independent management of monetary policy to maintain price stability. The degree of price stability is determined through a Policy Target Agreement with the Minister of Finance.^[3] Policy Target Agreements are public documents and hence a government cannot secretly change the targets to gain a short term surge in economic growth.

The mechanism of this is the Official Cash Rate (a percentage) which affects short-term interest rates. The Bank will provide cash overnight at 0.50% above the cash rate to Banks against good security with no limit. Furthermore, the bank will accept deposits from financial institutions with interest usually at the official cash rate.

Banks that offer loans at interest higher than the official cash rate will be undercut by Banks that offer cheaper loans, and banks that loan out lower than the official cash rate will make less compared to other banks which can simply deposit their money in the Reserve Bank with a higher rate of return. The Reserve Bank borrows and offers loans with no limit on volumes in order to ensure that the interest rate in the market remains at the Official Cash rate level.

Through controlling this, the Reserve Bank can then influence short term demand in the New Zealand Economy and use this to control prices.

Adjustments to the official cash rate are made eight times a year. It can make unscheduled adjustments but does not usually do so.

Fractional-reserve banking

Like all modern monetary systems, the monetary system in New Zealand is based on fiat and fractional-reserve banking. In a fractional-reserve banking system, the largest portion of money created is not created by the Reserve Bank itself, 80% or more is created by private sector commercial banks.

Issuing of currency

The Bank by virtue of the Reserve Bank Act has the sole right of issuing New Zealand legal tender notes and coins. The Reserve Bank controls the issuing of currency to banks and also replaces used and damaged money from circulation. In March 2005 the bank decided to remove the 5 cent coin from circulation (the following year), as well as reducing the size of 10, 20 and 50 cent coins.

The Reserve Bank accepts all New Zealand currency for payment at face value. This applies to all demonetised or withdrawn currency, however such currency need not be accepted by money changers as it is no longer legal tender. All decimal notes are legal tender except $1 and $2 notes as these have been withdrawn. Damaged notes are still worth something so long as they are recognisable. The Reserve Bank website notes that as a rule of thumb if there is more than half a bank note they will pay its full value. To receive payment people have to turn in the note to either the Reserve Bank in Wellington or any bank.

Collectors coins

The Reserve Bank from time to time produces limited runs of legal tender coins for collectors and have a New Zealand theme and design. These coins do not circulate, but are legal tender. The Coins are sold for the Reserve Bank via New Zealand Post's business unit.^[4]

Supervision of the New Zealand Banking system by the Reserve Bank

The Reserve Bank also acts to supervise the New Zealand banking system to ensure that the system remains healthy, however it does not guarantee that a bank will not fail, or face problems.

As of February 2016 there are 25 registered banks.

All registered banks operating in New Zealand must issue a quarterly disclosure statement, and the Reserve Bank supervises these.

The purpose of these disclosure statements is to:

Assist depositors to make sound decisions
Encourage banks to maintain sound banking practices

The summary comprises:

A Key Information summary that provides a brief overview of the bank's financial condition
General Disclosure statement to provide comprehensive information on the bank
Supplemental Disclosure Statement

More information, see list of registered banks at the RBNZ website.^[5]

Regulation of non-bank deposit takers (NBDTs)

Under Part 5D of the Reserve Bank of New Zealand Act 1989 (the "Act"), the RBNZ is charged with the enforcement of the credit rating and prudential requirements applying to non-bank deposit takers (NBDTs) in New Zealand. These functions were introduced by the enactment of the Reserve Bank of New Zealand Amendment Act 2008. Further amendments to Act have been foreshadowed to complete the regulatory framework for the NBDT sector.^[6]

Prudential supervision of the New Zealand insurance industry by the Reserve Bank

Under section 12 of the Insurance (Prudential Supervision) Act 2010, the RBNZ is charged with the prudential supervision of the New Zealand insurance industry. This includes the licensing of persons to carry on insurance business in New Zealand.

History

The Reserve Bank of New Zealand was established from 1 August 1934 by the Reserve Bank of New Zealand Act 1933. The Reserve Bank first issued banknotes in 1934, see New Zealand pound.

List of Governors

The following have served as governors of the Reserve Bank:^[7]

Leslie Lefeaux (1 January 1934 – 31 December 1940)
William Fox Longley Ward (Acting Governor: 1 May 1941 – 1 February 1944), (1 February 1944 – 8 July 1948)
Edward Coldham Fussell (21 July 1948 – 20 July 1962)
Gilbert Wilson (21 July 1962 – 20 July 1967)
Sir Alan Low (21 July 1967 – 11 February 1977)
Raymond W. R. White (12 February 1977 – 11 February 1982)
Dick L. Wilks (12 February 1982 – 17 May 1984)
Sir Spencer Russell (18 May 1984 – 31 August 1988)
Dr Donald Brash (1 September 1988 – 26 April 2002)
Dr Alan Bollard (23 September 2002 – 25 September 2012)
Graeme Wheeler (26 September 2012 – present)

References

↑ Singleton, John (11 April 2012). "Reserve Bank". Te Ara - the Encyclopedia of New Zealand. Retrieved 19 April 2012.
↑ "Monetary policy in `Interesting Times'". rbnz.govt.nz.
↑ "Policy Targets Agreement" (PDF). rbnz.govt.nz.
↑ "New Zealand Post Coins". nzcoins.co.nz.
↑ "Register of registered banks in New Zealand". rbnz.govt.nz.
↑ "Overview of NBDT regime". rbnz.govt.nz.
↑ "Governors of the Reserve Bank - past and present". Reserve Bank. Retrieved 9 February 2016.

External links

Wikimedia Commons has media related to Reserve Bank of New Zealand.

Central banks

Global

Global	Bank for International Settlements Basel Committee on Banking Supervision Financial Stability Board

By continent

Africa	Bank of Central African States Central Bank of West African States Bank of Algeria National Bank of Angola Bank of Botswana Bank of the Republic of Burundi Bank of Cape Verde Central Bank of the Comoros Central Bank of the Congo Central Bank of Djibouti Central Bank of Egypt Bank of Eritrea National Bank of Ethiopia Central Bank of The Gambia Bank of Ghana Central Bank of the Republic of Guinea Central Bank of Kenya Central Bank of Lesotho Central Bank of Liberia Central Bank of Libya Central Bank of Madagascar Reserve Bank of Malawi Central Bank of Mauritania Bank of Mauritius Bank Al-Maghrib (Morocco) Bank of Mozambique Bank of Namibia Central Bank of Nigeria National Bank of Rwanda Central Bank of São Tomé and Príncipe Central Bank of Seychelles Bank of Sierra Leone Central Bank of Somalia Bank of Somaliland South African Reserve Bank Bank of South Sudan Central Bank of Sudan Central Bank of Swaziland Bank of Tanzania Central Bank of Tunisia Bank of Uganda Bank of Zambia Reserve Bank of Zimbabwe

Americas	Central Bank of Argentina Central Bank of Aruba Central Bank of The Bahamas Central Bank of Barbados Bermuda Monetary Authority Central Bank of Brazil Bank of Canada Central Bank of Chile Bank of the Republic (Colombia) Central Bank of Cuba Central Bank of Curaçao and Sint Maarten Eastern Caribbean Central Bank Cayman Islands Monetary Authority Central Bank of Ecuador Bank of Guatemala Bank of the Republic of Haiti Central Bank of Honduras Bank of Jamaica Bank of Mexico Central Bank of Nicaragua Central Reserve Bank of Peru Central Bank of Suriname Central Bank of Trinidad and Tobago Federal Reserve System (United States) Central Bank of the Uruguay Central Bank of Venezuela

Asia	Da Afghanistan Bank Central Bank of Bahrain Bangladesh Bank Royal Monetary Authority of Bhutan Brunei Currency and Monetary Board Autoriti Monetari Brunei Darussalam National Bank of Cambodia People's Bank of China Hong Kong Monetary Authority Reserve Bank of India Bank Indonesia Central Bank of the Islamic Republic of Iran Central Bank of Iraq Bank of Israel Bank of Japan Central Bank of Jordan National Bank of Kazakhstan National Bank of the Kyrgyz Republic Bank of Korea Central Bank of the Democratic People's Republic of Korea Central Bank of Kuwait Banque du Liban Monetary Authority of Macao Bank Negara Malaysia Maldives Monetary Authority Bank of Mongolia Central Bank of Myanmar Nepal Rastra Bank Central Bank of Oman State Bank of Pakistan Palestine Monetary Authority Bangko Sentral ng Pilipinas Qatar Central Bank Saudi Arabian Monetary Authority Monetary Authority of Singapore Central Bank of Sri Lanka Central Bank of Syria Central Bank of the Republic of China (Taiwan) Bank of Thailand Central Bank of Turkmenistan Central Bank of the United Arab Emirates Central Bank of Uzbekistan State Bank of Vietnam Central Bank of Yemen

Europe	European Central Bank (Eurosystem) National Bank of the Republic of Abkhazia Bank of Albania Central Bank of Armenia National Bank of Austria Central Bank of Azerbaijan National Bank of the Republic of Belarus National Bank of Belgium Central Bank of Bosnia and Herzegovina Bulgarian National Bank Croatian National Bank Central Bank of Cyprus Czech National Bank Danmarks Nationalbank (Denmark) Deutsche Bundesbank (Germany) Bank of England Bank of Estonia Bank of Finland Banque de France National Bank of Georgia Bank of Greece Hungarian National Bank Central Bank of Iceland Central Bank of Ireland Banca d'Italia Central Bank of Kosovo Bank of Latvia Bank of Lithuania Central Bank of Luxembourg National Bank of the Republic of Macedonia Central Bank of Malta National Bank of Moldova Central Bank of Montenegro De Nederlandsche Bank Norges Bank Central Bank of the Turkish Republic of Northern Cyprus National Bank of Poland Banco de Portugal National Bank of Romania Central Bank of Russia National Bank of Serbia National Bank of Slovakia Bank of Slovenia Gosbank (Soviet Union) Bank of Spain Swedish National Bank Swiss National Bank Central Bank of the Republic of Turkey National Bank of Ukraine

Oceania	Reserve Bank of Australia Reserve Bank of Fiji Reserve Bank of New Zealand Bank of Papua New Guinea Central Bank of Samoa Central Bank of Solomon Islands National Reserve Bank of Tonga Reserve Bank of Vanuatu

Policies and implementation

Policies	Capital requirement Contractionary monetary policy Expansionary monetary policy Basel II Basel III Basel 4

Implementation	Capital control Discount rate Interest rates Money creation Open market operation Sovereign wealth fund

Bretton Woods system

International Monetary Fund World Bank Group International Bank for Reconstruction and Development International Centre for Settlement of Investment Disputes International Development Association International Finance Corporation Multilateral Investment Guarantee Agency

Lists

List of central banks Central banks and currencies of Africa Central banks and currencies of Asia-Pacific Central banks and currencies of the Caribbean Central banks and currencies of Europe Central banks and currencies of Central America and South America

Names in italics indicate non-sovereign (dependent) territories, former countries, or states with limited recognition

New Zealand currency

Coins	10c 20c 50c $1 $2

Banknotes	$5 $10 $20 $50 $100

Withdrawn	Coins : 1c 2c 5c Banknotes : $1 $2

Historic (before 1967)	Pound sterling (UK) New Zealand pound

Related topics	Banks : Reserve Bank of New Zealand Currencies : AUD, NZD Transactions : Swedish rounding

Economy of New Zealand

History	Head tax, 1881 IC&A Act, 1894 Wool boom, 1951 Black Budget, 1958 Think Big, 1979-84 Rogernomics, 1984-90 Ruthanasia, 1990-93 Leaky homes crisis, 2000s Finance company collapses, 2006-12

Currency	New Zealand dollar Dollar banknotes twenty Dollar coins one Twenty-cent coin New Zealand pound

Government	Taxation New Zealand Treasury New Zealand budget New Zealand Trade and Enterprise Reserve Bank of New Zealand Official Cash Rate Overseas Investment Office Commerce Commission KiwiSaver

Industry	Agriculture New Zealand Meat Producers Board New Zealand Dairy Board New Zealand Wool Board Beer Fishing Aquaculture Whaling Forestry Woodchipping Kauri gum Licensing trust Mining Tourism

Economic conditions	Social class Income Poverty International rankings

Agreements	Closer Economic Relations Free trade agreements Malaysia China Trans-Pacific Strategic Economic Partnership Australian and New Zealand Standard Industrial Classification

Unions and lobbyists	Campaign Against Foreign Control of Aotearoa New Zealand Business Roundtable New Zealand Council of Trade Unions The New Zealand Institute

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