First of all, the Reserve Bank of New Zealand is the central bank of New Zealand. The central bank’s main purpose is to maintain the stability of the country’s financial system. It is noteworthy that Adrian Orr is the current Governor of New Zealand’s Reserve Bank.
It is worth noting that it is responsible for maintaining monetary policy, meeting the currency needs of the public, as well as providing support services for other banks in New Zealand, in addition to maintaining the stability of the country’s financial system.
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In 2007, the country’s government made the decision to expand the role of the country’s central bank by increasing its regulatory oversight to include not only banks but other organizations as well.
One interesting fact: About $30 billion worth of transactions are settled through the central bank’s payment and settlement systems every day.
The central bank was established in 1934 after the passage of the Reserve Bank Act of 1933. As opposed to the United States Federal Reserve, the Reserve Bank of New Zealand doesn’t have any private owners. Although the central bank isn’t a department of the government, it is entirely owned by the country’s government, and the additional revenue it makes goes into Crown accounts.
Reserve Bank of New Zealand and its functions
The country’s central bank derives its powers from the Reserve Bank Act of 1933. However, it also derives its powers from the Non-bank Deposit Takers Act of 2013, the Insurance (Prudential Supervision) Act of 2010 as well as the Anti-Money Laundering and Countering Financing Terrorism Act of 2009.
Interestingly, the Reserve Bank of New Zealand conducts monetary policy for New Zealand in order to support price stability as well as maximum employment in New Zealand’s economy. To manage monetary policy, the Reserve Bank of New Zealand sets the official Overnight Cash Rate of interest on cash lending to banks, etc.
In addition to developing monetary, regulatory, as well as financial policies, the central bank also has a number of other responsibilities.
One of the primary responsibilities of the central bank is issuing the country’s currency, which is the New Zealand Dollar, or Kiwi, as many people call it.
Importantly, the New Zealand dollar, also known as the Kiwi or Kiwi dollar, is one of the most highly traded currencies.
The local currency was introduced in 1967 at a rate of two dollars to one pound. In the beginning, it was pegged to the US dollar at a rate of 1.43 USD: 1 NZD. As a reminder, in 1985, the New Zealand dollar was floated. It is notably vulnerable to swings in dairy commodity prices, as New Zealand is a top dairy exporter.
Furthermore, it is responsible for regulating banks, insurers, as well as non-bank deposit takers such as credit unions. Let’s not forget that, as of May 2020, there are 27 registered banks that the central bank supervises. The central bank is also responsible for overseeing and operating payment systems within the country.
