The Financial Policy Remit 2024
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:
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.
It is desirable for the Reserve Bank to have regard to the following matters:
The Government supports the Reserve Bank’s objective of promoting and protecting financial stability. The Government also wishes to see a financial system that contributes to New Zealand’s economic growth. A more competitive financial system is critical to deliver services at a low cost to customers and promote greater innovation in product offerings.
The Reserve Bank’s prudential strategy should seek to avoid large disruptions to the financial system that could negatively impact real economic activity. The Reserve Bank should regularly assess whether its prudential settings are appropriately calibrated to achieve financial stability, while encouraging competition and the efficient provision of financial services.
The Government accepts that failures of individual institutions for institution-specific reasons will occur from time to time, consistent with the normal operation of a dynamic market. The Government expects these to be managed in a manner that minimises the disruption to the financial system and broader economy, and prioritises protections for consumers, depositors, and public funds.
The Minister also considers it is desirable for the Reserve Bank to have regard to the following matters.
The Government regards competition in the financial system as a key priority to deliver better customer outcomes. As part of promoting this objective, the Reserve Bank should ensure that prudential regulation and supervision do not impede effective competition and facilitates the goal of improving competition, while remaining consistent with the financial stability objective.
In taking account of competition within the context of the legislative framework, the Reserve Bank should consider how its regulations can be used to reduce barriers to entry and exit. Regulatory settings should enable competition from growth of smaller players by seeking a proportionate approach to regulation.
In order to maintain a regulatory environment that is both secure and enabling, the Government considers that regular reviews of regulatory standards are important to support an innovative and adaptive regulatory system.
The regulatory environment should be able to flexibly adapt to new situations, supporting innovation overall. The regulatory environment should have sufficient flexibility to prioritise adapting to new situations, and not unnecessarily inhibit innovation.
The Government considers it is important to support financial inclusion and the ability of New Zealanders to access financial products and services. Barriers to firms accessing finance or constraints on consumers opening banking products can undermine economic participation, the efficiency of capital allocation, and the productive potential of the economy.