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Consultation on Phase 2 of the Reserve Bank Act Review

Friday 18 Jan 19 3:11pm
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
its role.

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
stability.
In general, we support having a clear focus on a small number of objectives rather than a
diluted focus on a larger number of objectives. We believe that the current high-level
objectives provide the Reserve Bank with the scope to maintain a well-functioning, resilient,
and efficient financial system.

However, to promote efficiency and effectiveness, we note that it will be important to
continue to have clarity on the roles and responsibilities of the two key regulators (being the
Financial Markets Authority and the Reserve Bank of New Zealand), as outlined in Chapter
One of the consultation document.

Read the full submission.
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