Reserve Bank releases Annual Report

The Reserve Bank is in good shape to deal with current macroeconomic and
financial stresses, Governor Alan Bollard said today when releasing the
Bank's 2007-2008 Annual Report, covering the year to 30 June 2008.

"We are a full-service central bank," Dr Bollard said. "That means we
do monetary policy, bank supervision, payment and settlement services,
currency, liquidity and foreign reserves management all in one building.
In addition, we maintain close relations with The Treasury and other
parts of Government. In principle, that means we are better placed than
some of our offshore colleagues - where these functions are split - to
identify economic-financial stresses and do something about them."

Dr Bollard said the Bank has done a lot of work over the past few years
to prepare for market stresses. These developments are described in the
Annual Report.

"They include work to improve the robustness of the financial system:
improved bank surveillance, better bank governance requirements, new
Reserve Bank liquidity measures, minimum bank liquidity requirements,
refreshed and extended payment and settlements technologies, stress
testing, and new regulation planned for non-bank financial institutions
and the insurance industry.

"The Bank is also using its balance sheet differently. We have a new
foreign exchange policy to help smooth peaks and troughs in the exchange
rate. In addition, we have built up a planned open foreign exchange
position to give us more leverage in the event of severe volatility in
the markets. We have a new capital injection from the Government, and
have invested in a more sophisticated treasury management system."

Dr Bollard said the Bank continues to develop its macroeconomic analysis
tools, which now include a suite of data-driven forecasting models, and
a new central forecasting and policy model. It has done considerable
work on the effects and management of a slowing economy.

The Bank spent a net $38.1 million on activities covered by its Funding
Agreement, which was 7.1 percent below the $41 million in the Agreement.
The Bank generated a surplus of $535 million. Gross mark-to-market
gains on the Bank's open foreign exchange position were $344 million. A
dividend of $168 million has been paid to the Crown.

The Annual Report includes a pictorial supplement illustrating where the
Bank's funding comes from, where this is invested, what incomes it
derives and how this is spent. This is a new initiative aimed at
providing a simple overview of the Bank's finances for the lay reader.
The Annual Report can be viewed on the Reserve Bank website
(www.rbnz.govt.nz).