Financial resilience strengthened

The Reserve Bank’s latest Annual Report demonstrates progress on several fronts to enhance New Zealand’s resilience against global financial and economic uncertainty.

“With the aftershocks of international and domestic crises persisting longer than expected, it is important that New Zealand’s ability to withstand shocks continues to be strengthened,” departing Reserve Bank Governor Alan Bollard said today, when releasing the Bank’s 2011-2012 Annual Report.

Dr Bollard said the Bank had initiated in the last year several business priorities to promote resilience for the economy, the financial system, and the Bank.

The Bank has developed regular monitoring and measurement of financial imbalances in the economy. Four macro-prudential tools have been identified that the Bank could consider using if future credit conditions were to warrant it, though with current subdued credit growth there is no need to deploy such tools at present.

The Bank intends to finalise the Basel III prudential capital requirements for banks in 2012, and banks will have to comply with the core capital requirements from the beginning of 2013. As already announced, a further rise in the minimum core funding ratio to 75 percent will occur from 1 January 2013.

The Bank granted over 100 provisional or full insurance licences by the deadline of March 2012, and is now working on the path to full licences by September 2013. A new statute establishing a licensing regime for the non-bank deposit taking sector is progressing through Parliament.

Among other developments, the Bank progressed research for the new banknotes scheduled to be introduced in 2014, introduced systems to reduce risks in New Zealand’s multi-billion-dollar payments system, and made preparations for the introduction of anti-money laundering measures.

The Bank spent a net $47.0 million on activities covered by its Funding Agreement in the June 2012 year, and a dividend of $160 million was paid to the Crown.

Dr Bollard said he had had a turbulent but hugely rewarding decade as Governor and Chief Executive. Mr Graeme Wheeler will take over as Governor and Chief Executive, effective from 26 September.