In November 2017 the Government announced it would undertake a review of the Reserve Bank of New Zealand Act 1989 to create a modern monetary and financial policy framework.
The Review of the Reserve Bank Act (“the Review”) was undertaken by the Treasury and the Reserve Bank of New Zealand. While the Review itself has been completed, work to enact some of the measures is ongoing. You can find more information about the Review on the Reserve Bank website: Reserve Bank Act Review
There are three tranches to the Reserve Bank Act reforms:
Prudential regulation and supervision of deposit takers and introduction of deposit insurance is being progressed by a Deposit Takers Bill.
The Minister of Finance announced new Deposit Taker measures on 22 April 2021.
The proposed new Deposit Takers Bill will:
Create a single regulatory regime for all bank and non-bank deposit takers (such as building societies and finance companies);
Provide the framework for regulating and supervising deposit takers, ensuring these entities comply with prudential requirements designed to protect and promote financial stability;
Provide the framework for managing and resolving any deposit taker in financial distress;
Introduce a new deposit insurance scheme that will protect up to $100,000 per depositor, per institution in the event of a failure.
It is anticipated that this Bill will be introduced to Parliament in mid-2022. Since May 2021, the Reserve Bank has led final policy work and drafting and an exposure draft of the Bill was released in December 2021.
Measures to enact deposit insurance will be prioritised in order to have the scheme up and running in 2023.
Institutional and accountability reforms have been enacted by the Reserve Bank of New Zealand Act 2021, which received Royal assent on 16 August 2021. This Act is expected to commence on 1 July 2022.
The Reserve Bank of New Zealand Act 2021 modernises the institutional arrangements of the Reserve Bank by replacing the single decision-maker model with a governance board and strengthening reporting and accountability requirements. The new governance board will be tasked with all the responsibilities of the Reserve Bank (other than those given to the Monetary Policy Committee). The Act will also reframe and clarify the financial stability objective for the Reserve Bank and provide for a Financial Policy Remit to be issued by the Minister. These and other changes in the Act together strengthen the Reserve Bank’s governance and accountability settings while protecting its operational independence.
Monetary policy reform was enacted in 2018 by the Reserve Bank of New Zealand (Monetary Policy) Amendment Act.
“Supporting maximum sustainable employment” was added to the economic objectives for the Reserve Bank and a Monetary Policy Committee (MPC) was created with responsibility for formulating monetary policy.
Further information on the monetary policy framework is available on the Reserve Bank’s website.
Independent expert advisory panel
The Minister of Finance appointed an Independent Expert Advisory Panel, chaired by Suzanne Snively (ONZM), to assist with the Review. Panellists included Belinda Moffat, Barbara Chapman, Dr Girol Karacaoglu and Dr Malcolm Edey.
Proactive release of documents
The Treasury has had an ongoing programme of released documents, such as Cabinet papers, advice and public submissions, relating to the Review of the Reserve Bank of New Zealand Act. This is to be transparent as well as to help inform public debate on the Review as it occurred. The documents are largely organised around the phases of the Review as it was undertaken, phase one being the amendment to monetary policy, and phase two being the financial stability, regulation and supervision work and the institutional and accountability reforms.
Proactively released information, speeches, media releases, and announcements are all available at the Treasury Reserve Bank Act Review proactive releases, speeches and announcements page.