FINANCIAL - MSC NewsWire

Inflation targeting practices similar across central banks

Inflation targeting practises are similar across many central banks despite significant differences in their formal frameworks, says the Reserve Bank in its latest Bulletin article published today. The Bulletin article titled “An international comparison of inflation targeting frameworks” looks at how New Zealand’s Policy Targets Agreement compares to nine other advanced economy central banks, and how the specifications in each framework compare to the actual practice of each central bank. “In order to conduct the comparison we focused on five components of an inflation-targeting framework: the inflation target definition, communication of monetary policy, secondary considerations, assessment of inflation-targeting performance, and…

Video series for Money Week 2017

To support Money Week 2017, the Reserve Bank and the Commission for Financial Capability have collaborated in a series of videos to encourage people to better manage their debt and talk more freely about their finances. The videos focus on this year’s Money Week theme of ‘debt’ and feature some of the families associated with our banknotes and connects with other pioneering New Zealanders, and the Queen, who appear on our Brighter Money banknotes. Watch the videos | A RBNZ release || August 14, 2017 |||

Official Cash Rate unchanged at 1.75 percent

Statement by Reserve Bank Governor Graeme Wheeler: The Reserve Bank today left the Official Cash Rate (OCR) unchanged at 1.75 percent. Global economic growth has become more broad-based in recent quarters. However, inflation and wage outcomes remain subdued across the advanced economies, and challenges remain with on-going surplus capacity. Bond yields are low, credit spreads have narrowed and equity prices are at record levels. Monetary policy is expected to remain stimulatory in the advanced economies, but less so going forward. The trade-weighted exchange rate has increased since the May Statement, partly in response to a weaker US dollar. A lower…

Simple, conservative approach for prudential supervision

The Reserve Bank aims to improve the effectiveness of its prudential regulation through a combination of simpler regulations and bolstering its supervisory activities. Deputy Governor Grant Spencer said in a speech to the Kanga News Capital Markets Conference today that the Bank is considering how it might improve its regulatory framework. Two catalysts in this regard are the recent IMF Financial Sector Assessment Program (FSAP) report, and the Bank’s recently initiated review of bank capital adequacy. “We must maintain the high international reputation of the New Zealand financial system. Within that, we seek to maintain and build on the Bank’s…

External expert reviews forecasting processes RBNZ

An external central banking expert has commended the Reserve Bank’s forecasting and monetary policy decision-making processes. As part of good practice peer review, the Bank regularly commissions reviews by external experts of its forecasting and monetary policy decision-making processes. It has modified its processes over the years in light of their findings. Dr Philip Turner, former Deputy Head of the Monetary and Economic Department and a member of Senior Management of the Bank for International Settlements (BIS), was requested to attend the February 2017 forecasting round, report on his assessment of the process, and make recommendations where relevant. This issue…

How the Reserve Bank thinks about the trends in the New Zealand economy

Understanding key trends in the economy is crucial for the Reserve Bank, even though the trends can only be estimated and never directly observed and measured. Assistant Governor and Head of Economics Dr John McDermott said today that three trends were particularly important: the neutral interest rate; potential output growth; and the equilibrium real exchange rate. “These trends are the anchors around which we aim to stabilise the economy, and thereby inflation over the medium term,” Dr McDermott said in a speech. “While these trends are unobservable and the Reserve Bank has no control over them, they’re important to pin…

Bulletin article reviews outcomes of IMF’s Financial Sector Assessment Programme

The Reserve Bank has released a Bulletin article reviewing the outcomes of the International Monetary Fund’s (IMF) latest Financial Sector Assessment Programme (FSAP) for New Zealand. An FSAP is a comprehensive review of a country’s financial system against international standards, with a particular focus on the quality of financial sector regulation. The Bulletin article explains the considerable amount of preparatory work that the Reserve Bank and other New Zealand agencies undertook to support the IMF’s two missions to New Zealand in 2016. The results of the IMF’s assessment were released in early May 2017. They included more than 100 recommendations,…

Reserve Bank outlines stance on cyber issues

Firms in the finance sector, regulators, and other authorities all have a part to play in managing cyber security risks while still benefiting from the opportunities of new financial technology. “The dynamic cyber environment means organisations have to be nimble in their approach to cyber security - focused on outcomes, rather than prescriptive compliance exercises,” Reserve Bank Head of Prudential Supervision, Toby Fiennes, said in a speech delivered today to the Future of Financial Services conference, in Auckland. He said that cyber-attack poses a significant threat to the global financial system, as shown by the ‘WannaCry’ ransom-ware attack that affected…

Reserve Bank says lower external debt is encouraging, but some risks remain

A large improvement in New Zealand’s net foreign liabilities as a share of GDP since 2009 makes the economy less vulnerable to shocks, Deputy Governor Geoff Bascand said in a speech today. “New Zealand’s net foreign liabilities – what we owe to the rest of the world, broadly speaking – reached nearly 85 percent of GDP at the start of 2009 but now they are down to 58.5 percent of GDP, their lowest level since the late-1980s,” Mr Bascand said. “New Zealand has become less reliant on offshore funding over the past decade, and the maturity of bank borrowing has…

Reserve Bank consults on what should qualify as bank capital

The Reserve Bank has started a public consultation about what type of financial instruments should qualify as bank capital. Capital regulations address not only the minimum amount of capital that banks must hold, but also the type of financial instruments that qualify as capital. The consultation that starts today is about the nature of financial instruments that are suitable, rather than the amount of capital. Important considerations for regulations about bank capital include: the Reserve Bank’s regulatory approach; the resolution regime in the event of a bank facing difficulties; international standards issued by the Basel Committee on Banking Supervision; the…

Reserve Bank and MBIE open public consultation on foreign margin requirements for OTC derivatives

The Reserve Bank of New Zealand and the Ministry of Business, Innovation and Employment have started a public consultation on the implications for New Zealand of foreign margin requirements for over-the-counter derivatives. New Zealand has no margin requirements in over-the-counter derivatives, but several banks registered to operate in New Zealand will likely have to comply with margin rules being implemented in foreign jurisdictions. Margins is collateral exchanged by derivative market participants in order to protect against the risk posed by credit exposures and to reduce the risks of financial market contagion if a derivative contract counter-party defaults. Some features in…

Brighter Money banknotes’ security features

The Reserve Bank has developed a short video to help the public identify the ‘real deal’ Brighter Money banknote. The video explores the banknote’s sophisticated security features, showing the public how to identify a genuine banknote by the ‘look, feel and tilt’ sensory approach used by other central banks to identify a counterfeit. “Being able to identify a real New Zealand Series 7 Brighter Money banknote is important to maintaining New Zealand’s low counterfeit rate,” says Reserve Bank Head of Currency, Property and Security Steve Gordon. "New Zealand has a low counterfeit rate by international standards and the Bank wants…

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