Why are these important and how can they be achieved?
Christian Hawkesby (pictured above), deputy governor of the Reserve Bank of New Zealand, talked about the interconnection between financial inclusion and financial stability – and the important role of RBNZ in achieving these two.
“Our work to promote a sound and stable financial system is not just to avoid and mitigate periods of instability, but to enable an environment that promotes the prosperity and well-being of New Zealanders and contribute to a sustainable and productive economy,” Hawkesby said in a speech to the Institute of Directors in Canterbury on Friday. “We do this by seeking a strong, efficient, innovative, and inclusive financial system, consistent with our Financial Policy Remit.”
Like other central banks, RBNZ also contributes towards improving financial inclusion, which Hawkesby defined as “individuals and businesses having access to useful and affordable financial services delivered in a responsible and sustainable way.”
Initiatives towards this goal included delivering inclusive payment systems, factoring inclusion into regulatory settings, collaborating with public and private networks, delivering financial literacy programmes, and undertaking research to fill evidence gaps.
To achieve financial inclusion, Hawkesby said RBNZ’s highest contribution was financial stability.
“A well-functioning financial system with low probability of insurers and deposit-takers getting into trouble increases the likelihood that people can access, and have trust in, the products and services they rely on,” he said.
Financial inclusion can also contribute to stability.
“Providing financial services to a larger customer base can promote a higher share of customer deposit funding, contributing to stability,” Hawkesby said. “Inclusion efforts, such as increased lending to smaller firms, can also help to diversify asset portfolios and reduce the relative size of any single borrower.
“A review of 2,600 banks in 86 countries found a higher level of inclusion contributes to greater bank stability, particularly in countries with strong institutions and sound regulatory settings.”
Two programs that help RBNZ promote financial inclusion include Kimihia te mea ngaro – Māori access to capital programme and Future of money – Te moni anamata programme.
Kimihia te mea ngaro – Māori access to capital programme was introduced to better understand Māori access to capital in the New Zealand economy and bring a more deliberate approach to financial inclusion. RBNZ’s Future of money – Te moni anamata programme, meanwhile, ensures that the money the central bank issues continues to enjoy trust and confidence and promotes financial and social inclusion.
“We will continue to explore synergies between inclusion and stability as we develop our approach to financial inclusion,” Hawkesby said. “We are doing so in concert with our Council of Financial Regulators partners, for which ‘Financial Inclusion’ is one of five priority themes.”
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