Reserve Bank Bulletin released

The Reserve Bank today released the December 2010 issue of the Reserve Bank of New Zealand Bulletin (http://www.rbnz.govt.nz/research/bulletin/2007_2011/dec2010.html).

Set against the backdrop of the Bank’s expanded regulatory responsibilities, the first two articles look at aspects of these new functions. The lead article explains rules introduced for non-bank deposit taking institutions (NBDTs) such as building societies, credit unions and finance companies aimed at further advancing the soundness and efficiency of New Zealand’s financial system.

The second article is dedicated to another arm of the Bank’s bolstered regulatory duties, detailing the Insurance (Prudential Supervision) Act 2010. As the failure of an insurer can have a significant impact on large numbers of policyholders, the new Act is aimed at bringing minimum prudential standards to the sector. The article explains the rationale behind the legislation, its objectives and how the Reserve Bank plans to achieve these.

The final two articles in the December Bulletin delve into currency trading trends during the global financial crisis and New Zealand’s imbalances in a cross-country context.

The currency trading article notes continued growth in the daily turnover of foreign exchange, although this growth has more recently slowed. It also highlights a fall in the popularity of the ‘carry trade’ and in the international focus on the New Zealand dollar.

The final piece examines New Zealand’s net international investment position in a cross-country context. New Zealand’s net international investment position is the counterpart of running persistent current account deficits. This makes New Zealand vulnerable to changes in the availability of offshore finance although market pressures and the Reserve Bank’s Prudential Liquidity Policy have helped to improve New Zealand’s debt maturity recently. The paper also looks at the potential effect of fiscal consolidation on economic rebalancing.