Reserve Bank Act Review – Terms of Reference for Phase 2 released

The Terms of Reference for Phase 2 of the Review of the Reserve Bank Act were released today by Finance Minister Grant Robertson.

“A well-functioning and efficient financial system is important for improving the wellbeing and living standards of New Zealanders, and the regulatory framework is a key driver in the performance of the financial system,” Grant Robertson said.

“The Reserve Bank Act has been in place for nearly 30 years. Over that time, the scope, focus and intensity of regulation and supervision has evolved. Alongside this, changes to the Reserve Bank of New Zealand’s (RBNZ) statutory framework have occurred through a series of separate, targeted amendments rather than through a comprehensive review.

“The Terms for Phase 2 are broad and wide-ranging. They enable the Review to ensure the Act is fit for purpose and aligned with what the Government considers will provide a strong, flexible and enduring regulatory framework that enjoys broad public and industry support.

“The Terms were guided by a range of expert and sector perspectives, including previous reports by the Productivity Commission and the International Monetary Fund. A stakeholder consultation and feedback process in February and March 2018 also revealed support to review the Act. Written submissions on the Terms for Phase 2 will be released shortly.”

Phase 2 of the Review will be organised around a series of key topics and will consider the following:

  • The institutional arrangements for prudential regulation and supervision
  • Objectives, objective setting processes, and alignment with government policy and risk appetite
  • Statutory functions and powers
  • Role clarity for the Minister of Finance, Board and Governor, including the allocation and co-ordination of powers, functions, and tools
  • Accountabilities
  • The strengths of current legislation, including its flexibility
  • The balance between primary, secondary, and tertiary legislation, including in respect of setting policy
  • Co-ordination across government, including pre-existing forums such as the Council of Financial Regulators (CoFR)
  • Alignment with the domestic regulatory management system
  • Procedural approaches, fairness, and safeguards
  • International experience and best practice.

“It is not the Government’s current intention to separate the Reserve Bank’s prudential supervision responsibilities. But due to a high level of interest from external stakeholders, the Review will also consider submissions on this issue,” Grant Robertson said.

The Government announced the Review in November 2017. Phase 1 covered changes to the objectives of monetary policy to give due consideration to maximising employment alongside price stability and making provision for a committee decision-making model for monetary policy.

Treasury and RBNZ will jointly carry out the Phase 2 work, in conjunction with the Independent Expert Advisory Panel chaired by Suzanne Snively. The Panel will provide separate advice to the Minister as appropriate. The Government is considering adding additional members to the Panel for Phase 2, and will make announcements in the near future.

Public consultation and engagement with the sector will be a central feature of the Review. There will be further public consultation once the Review team has developed a work programme to progress the key topics identified in the Terms for Phase 2. Further information will be made available on The Treasury website.