Purpose

This Financial Policy Remit is issued by the Minister of Finance under section 203 of the Reserve Bank of New Zealand Act 2021 (“Act”).

The Financial Policy Remit provides for matters that are desirable for the Reserve Bank to have regard to in relation to one or more of the following, in accordance with section 204(1) of the Act:

• Achieving the financial stability objective.
• Acting in a way that furthers the objectives or purposes of the prudential legislation.
• Acting as a prudential regulator and supervisor under the prudential legislation.

The Reserve Bank Board must have regard to the Financial Policy Remit when acting in relation to prudential strategic intentions and standards, as set out in section 49 of the Act.

Matters Specified in Accordance with Section 204(1)

Protecting and promoting financial stability can have implications for the Government’s broader policy objectives and the wider economy. It is desirable for the Reserve Bank to have regard to the following matters.

The Government’s Desired Outcomes for the Financial System

It is desirable to have a financial system that is strong, efficient and inclusive, with a low incidence of failure of entities regulated by the Reserve Bank.

Within the appetite of a low incidence of failure, a competitive financial system should be encouraged so as to best ensure ongoing financial efficiency and inclusion. In this respect, the Reserve Bank should have regard to the benefits of:

• imposing regulatory and supervisory costs that are proportionate to the expected risks and benefits to the financial system and society;
• encouraging new investment and financial innovation that raise the productive potential of the economy; and
• encouraging the allocation of financial resources in a way that maximises the sustainable long-term growth of the New Zealand economy.

If a regulated entity does fail, the Reserve Bank is expected to manage the failure in a manner that minimises the costs of failure and disruption to the broader economy, and prioritises protections for vulnerable consumers, depositors and public funds.

Other Government Policy Priorities

The Minister also considers it is desirable for the Reserve Bank to have regard to the following matters.

Housing

The Government has a policy objective to support more sustainable house prices, including by dampening investor demand, which would improve affordability for first-home buyers. This is part of the broader Government Policy Statement on Housing and Urban Development, which provides a vision that everyone in Aotearoa New Zealand lives in a home and within a community that meets their needs and aspirations.

Climate Change

The Government has a priority of building resilience and facilitating adaptation of New Zealand’s economy, society and environment to climate change. It is important that the financial system continues to play an appropriate role in supporting community wellbeing and resilience as it responds to that transition and increases in underlying risks as a result of climate change.

Financial Inclusion

The Government has a priority of improving financial inclusion and maintaining financial sector diversity, including supporting access to finance and financial services for those who are less well-served by traditional institutions, including rural communities, disabled persons, low-income individuals, and small businesses.

Cyber Resilience

The Government has a priority of improving New Zealand’s cyber resilience, with a vision that New Zealand is confident and secure in the digital world. In light of evolving cyber risks, it is important that the public and private sector work closely together to achieve this objective.