Source: Reserve Bank of New Zealand
The Reserve Bank of New Zealand – Te Pūtea Matua – has welcomed the introduction of a Bill that sets out the organisation’s future institutional and governance arrangements. The Reserve Bank of New Zealand Bill was introduced to Parliament today by Minister of Finance Grant Robertson.
This is the first of two bills resulting from the Phase 2 review of the Reserve Bank of New Zealand Act 1989. As part of the broad-ranging review, the Government has decided that the current Act will be replaced with two new pieces of legislation – the ‘Reserve Bank Act’ and a ‘Deposit Takers Act’.
The Bill focuses on reforming the overall institutional, governance, accountability, and funding arrangements of the Bank. It implements decisions taken by Cabinet in December last year and in March and June this year.
Reserve Bank Governor Adrian Orr says the changes will ensure that the Bank’s legislative framework remains robust and fit-for-purpose for the years ahead.
“The Bill’s introduction to Parliament today is a significant step forward in modernising New Zealand’s monetary and financial stability framework, as well as the Reserve Bank’s operating powers and objectives.
“This is an important milestone for the Reserve Bank, and will update legislation that is 30 years old. It is an exciting stage in the Bank’s history, as we work together with the Government in resetting the foundations of the organisation,” Mr Orr said.
“The proposed legislative changes will re-shape the Reserve Bank as we know it, so I encourage all New Zealanders to have their say when the Bill goes through the Select Committee process.”
The Bill is expected to pass into law by September 2021, with full commencement targeted by July 2022 after a nine-month transition period.
Key provisions of the Bill include:
- adding an overarching financial stability objective, to complement the recently updated monetary policy objectives;
- strengthening decision-making through moving from a single decision maker to a board model;
- ensuring operational independence is balanced with appropriate accountability, with a number of changes to update the Reserve Bank’s accountability and reporting frameworks to align with state sector practice;
- providing for a Financial Policy Remit issued by the Minister, setting out matters that the Reserve Bank board must have regard to when to setting and implementing its strategic approach to financial stability;
- increasing accountability and transparency in the Reserve Bank’s management of foreign reserves, by requiring the Reserve Bank and the Minister to agree a Foreign Reserves Management and Co-ordination Framework;
- changes to the funding model to promote transparency and allow for appropriate recovery of costs, through industry levies and fees;
- providing the Council of Financial Regulators with a statutory mandate to support effective and responsive regulation of the financial system by facilitating cooperation and coordination between its members; and
- expanding the Reserve Bank’s functions in respect of cash, including supporting public confidence in banknotes by enabling the Reserve Bank to set standards for devices that check the authenticity and/or quality of banknotes.