This submission is from the Financial Services Council of New Zealand Incorporated (FSC) on the Reserve Bank of New Zealand’s Phase Two consultation of the Reserve Bank Act Review.
Our submission focuses on two recommendations.
1. We support the Reserve Bank continuing to be responsible for prudential regulation and supervision under an ‘enhanced status quo’.Our members have mixed views on the separation of monetary policy and prudential regulation, noting that the key requirement is for a well-resourced prudential regulator.
For those members that support the Reserve Bank continuing in its role as prudential supervisor, the rationale is that creating a new entity that would be responsible for prudential regulation could introduce unnecessary change and costs. In addition, to maintain public trust, consistency and reliability is important.
For those members that support the separation of monetary policy and prudential regulation,
the rationale is that the Reserve Bank’s emphasis on its monetary policy mandate may come
at the expense of its other mandates, notably prudential regulation. A dedicated prudential
regulator (i.e. a New Zealand Prudential Regulation Authority) would not have to balance
these competing priorities and could develop a distinct organisational culture better suited to
All our members agree with the comments in the consultation paper around the need to
increase resourcing to enable a greater focus on the Reserve Bank’s financial policy
responsibilities. We note that resourcing will be addressed in the next round of consultation.
2. We support a continued focus on soundness and efficiency, together comprising financial
In general, we support having a clear focus on a small number of objectives rather than a