Reserve Bank of New Zealand Act 2021

Institutional and accountability reform

Institutional and accountability reform has been enacted by the Reserve Bank of New Zealand Act 2021, which received Royal assent on 16 August 2021.

The Reserve Bank of New Zealand Act 2021 repeals and replaces the parts of the Reserve Bank of New Zealand Act 1989 that provide for the Reserve Bank's institutional, governance and accountability arrangements and central bank powers.

This Act modernises the institutional arrangements of the Reserve Bank by replacing the single decision-maker model with a governance board and strengthens reporting and accountability requirements.

The main changes include:

• Establishing a new governance board comprised of non-executive members and the Reserve Bank Governor responsible for all decision making (except decisions made by the Monetary Policy Committee);
• Reframing the overarching financial stability objective to “protecting and promoting the stability of New Zealand's financial system”, which will provide greater clarity for the Reserve Bank as New Zealand's prudential regulator;
• Ensuring operational independence is balanced with appropriate accountability – with changes to update the Reserve Bank's accountability and reporting frameworks, such as aligning with the Crown Entity framework requirements for Statement of Performance Expectations;
• Providing for a Financial Policy Remit to be issued by the Minister of Finance, setting out matters that the Board must have regard to;
• Changes to the funding agreement process between the Minister of Finance and the Reserve Bank to promote greater transparency, and the ability for the Reserve Bank's costs for its regulatory function to be recouped through industry levies and fees;
• Providing the Minister with the ability to direct the Reserve Bank to maintain a minimum level of capital; and
• 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.

A copy of the Act is available at the New Zealand Legislation website.

Following a transitional period, the new arrangements are expected to come into force by 1 July 2022.

The third and final Bill in this set of reforms – the Deposit Takers Bill – is expected to be introduced into Parliament in early 2022.

Key documents featuring substantive policy decisions

Proactively released information, speeches, media releases, and announcements are all available at the Treasury Reserve Bank Act Review proactive releases, speeches and announcements page.