What exactly is the Reserve Bank?
The Reserve Bank of New Zealand (RBNZ) serves as the country's central bank. It was founded in 1934 and, while not a government agency, has been entirely controlled by the New Zealand government since 1936. The Reserve Bank, like most central banks, is essentially a policy organization that functions to achieve three things:
- develop and implement monetary policy to preserve price stability and maximize long-term employment;
- encourage the preservation of a sound and efficient financial system; and
- fulfill the public's need for cash.
The Reserve Bank of New Zealand's Role (RBNZ)
The Reserve Bank's purposes are outlined in the Reserve Bank of New Zealand Act 1989, which also grants the Bank the functions and powers required to carry out its mission.
To fulfill its goals, the Reserve Bank performs a wide variety of activities, including monetary policy operations, monitoring and supervising registered banks to ensure the financial system's stability, maintaining foreign reserves, acting in financial markets, and issuing currency. In New Zealand, the Reserve Bank is the exclusive producer of money.
By contemporary international standards, New Zealand's monetary policy framework is traditional, with the objective of price stability. Accordingly, the Remit defines the Reserve Bank's monetary policy targets, which require the Reserve Bank to keep CPI inflation between 1 and 3 percent on average over the medium term, focusing on maintaining prospective average inflation around the 2 percent target midpoint and to support maximum sustainable employment.
The Reserve Bank is responsible for registering banks that fulfill requirements related to their financial status, governance, and capacity to do business prudently. The Reserve Bank is also in charge of regulating, licensing, and supervising financial and insurance companies, building societies, and credit unions.
The Reserve Bank of New Zealand manages New Zealand's wholesale payment and settlement systems, which are used by registered banks and a number of other financial institutions to execute transactions with one another. These systems settle about $30 billion in transactions every day. They are critical not just to the New Zealand economy but also to the Reserve Bank's monetary policy execution.
RBNZ AML/CFT Responsibilities
The Reserve Bank is one of three regulators responsible for ensuring that financial institutions comply with responsibilities meant to identify and discourage money laundering and terrorism funding. Taking action to eliminate money laundering and terrorism funding is critical, not only for the societal suffering caused by these unlawful actions but also for the damage these illicit operations may bring to the stability and reputation of the nation's financial system.
The Reserve Bank is organized around an economics department that conducts economic research and provides monetary policy advice;
- a financial system policy research and supervision unit that functions to maintain financial stability;
- a financial markets department that operates to maintain financial stability;
- a payment operations department that works to maintain financial stability;
- and a currency department that is responsible for the design and issuance of notes and coins.
Financial services, digital services, communications, internal audit, and human resources are among the support divisions. The Reserve Bank employs about 250 people and works from a purpose-built office facility on The Terrace in Wellington, as well as a modest rented office space in central Auckland.