FY23 a significant turning point in bank's history
Despite being a challenging year for monetary policy, the year spanning July 1, 2022, to June 30, has marked a significant turning point in Reserve Bank history, according to the central bank’s recently published annual report.
Over the past year, the Reserve Bank of New Zealand Act 2021 was commenced, and a fully empowered governance board established – this as inflation continued to sit at elevated levels due to international and domestic inflationary pressures.
“The board’s annual assessment of the monetary policy committee (MPC) was that it has a credible plan for returning inflation to within its target range of 1% to 3% per annum over the medium term, while supporting maximum sustainable employment,” said Neil Quigley (pictured above), RBNZ board chair.
A highlight of the year was the release of RBNZ’s Review and Assessment of Monetary Policy Formulation and Execution (RAFIMP), a detailed and comprehensive evaluation of monetary policy covering the five-year period from 2017 to 2022.
RBNZ also provided advice to the minister of finance on the MPC’s mandate, drawing upon feedback from two public consultations and insights from surveys and public workshops, and analysis of key monetary policy issues. Following the bank’s guidance, a fresh monetary policy remit and a new charter for the MPC were finalised.
RBNZ reported that it did not pay the Crown a dividend this year, in accordance with its dividend principles. The bank distributes any surplus capital beyond what is deemed necessary to safeguard against a prudent spectrum of potential financial losses that may arise from its activities. No excess capital of this kind, however, was logged at the end of 2022/23, and the minister agreed with RBNZ’s recommendation that no dividend should be paid.
The previous year marked another substantial step in RBNZ’s evolving approach to financial regulation and oversight. Its standout achievement was the enactment of the Deposit Takers Act 2023.
“This new legislation will transform our approach to the regulation of banks and other deposit takers and introduce the Depositor Compensation Scheme. There are many years of work ahead to make sure the new regime works well,” said Adrian Orr, RBNZ governor.
In the 2022/23 financial year, RBNZ sought an adjustment to its existing funding arrangement, which was approved by the Cabinet.
The bank’s funding agreement was then modified, enabling it to allocate extra resources for the implementation of the new regulatory and supervisory regime under the Deposit Takers Act and the Depositor Compensation Scheme. The change also facilitates additional investment in RBNZ’s crucial infrastructure projects and gives support to under-resourced key areas.
“As the first annual report prepared in accordance with the Act, it has new features which I encourage everyone interested in the work of the Reserve Bank to read,” Quigley said in a media release.
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