Call for change at Reserve Bank
Top economists want review of 30-year-old Act
Some of New Zealand’s top economic minds think the “objective and purpose” of the Reserve Bank should be revisited.
In a report, prepared for Finance Minister Grant Robertson, the Treasury canvassed the opinions of top economists and companies to help inform policy on reviewing the Reserve Bank Act.
This comes as the central bank and the Treasury call for public consultation on the review of the act.
The Government is in the process of making changes to the legislation which is 30 years old.
Yesterday, officials called for feedback on a number of potential changes in the way the Reserve Bank operated.
These include the introduction of a deposit protection, potentially through deposit insurance, as well as areas around the bank’s governance.
The report said there was an overall desire for a “comprehensive review” of the Reserve Bank Act.
“There was a general consensus that clear objectives and purpose is important, and [there is] strong support for reviewing the objectives and purpose of the Reserve Bank,” the report said.
Finance Minister Grant Robertson agreed.
In a statement, he said the Reserve Bank Act had been in place for close to 30 years and during that period, the scope, focus and intensity of regulation and supervision had evolved.
“Now is the right time to do that work to ensure we have a fit for purpose financial stability and regulatory framework for the coming decades.”
In total, the summary canvassed the opinions of 58 people and organisations.
These included former Finance Minister Michael Cullen, economist Shamubeel Eaqub, and Business NZ chief executive Kirk Hope.
Companies, such as Xero, Westpac, ANZ, BNZ and Kiwibank, also contributed to the report.
But the document does not name specific individuals or groups, rather it indicates “consensus views” in different areas.
It touched on many issues, including giving more weight to the Reserve Bank’s role in New Zealand’s financial stability, how the central bank makes decisions and how it approaches “crisis management”.
As well as this, the report said many of those canvassed think the Reserve Bank was “under resourced”.
Although independent from the Government, the Reserve Bank still receives its funding from Government.
“The majority of stakeholders thought the Reserve Bank is under resourced and some thought that this is influencing its approach to supervision, regulatory process and engagement with industry,” the report said.
In other words, those canvassed think the Government needs to be giving the Reserve Bank more money so it can better oversee the conduct of banks and financial institutions.
The report was part of the second phase of a review of the Reserve Bank Act, announced in November last year. The second phase focuses on the regulatory side of the Reserve Bank’s job. Phase two of the Review of the Reserve Bank Act opened yesterday.
“This work will ensure the act aligns with what the Government considers will provide a strong, flexible and enduring regulatory framework that enjoys broad public and industry support,” Robertson said.