The update and strengthening of the Reserve Bank’s decision-making and accountability arrangements will bolster New Zealand’s financial system and make it fit for purpose to address monetary and financial policy issues now and in the future, Grant Robertson said.
The Reserve Bank of New Zealand Bill was passed following the third reading in Parliament today.
“I am proud to see the passing of this important piece of legislation. Not only does it modernise the more than 30-year-old Reserve Bank Act, the reforms support and protect the Reserve Bank’s independence while ensuring it operates in an accountable and transparent manner,” Grant Robertson said.
“We have already passed legislation to modernise the Reserve Bank’s monetary policy objectives and decision-making processes. The Bill passed today is the second in a series of significant legislative reforms, and will provide the foundational framework for the Reserve Bank’s new institutional arrangements.”
Key features include:
strengthening decision-making: all decisions other than monetary policy will be made by a board rather than a single decision-maker – with the Governor as a member of the board;
reframing the financial stability objective to “protecting and promoting the stability of New Zealand’s financial system”, which will provide better clarity;
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 statements of intent and annual reports;
providing for a Financial Policy Remit to be issued by the Minister, setting out matters to which the Reserve Bank board must have regard;
changes to the funding model to promote transparency and allow for appropriate recovery of costs, through industry levies and fees;
providing the Minister with the ability to direct the 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.
Following Royal Assent, there will be a transition period to prepare for the new arrangements ahead of an anticipated commencement date of 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.
Further details can be found here.