This submission is in response to the second round of consultation on Phase 2 of the Reserve Bank of New Zealand Act review.

Written by Roger Partridge and Dr Bryce Wilkinson, this submission focuses on four issues raised in consultation documents 2A and 2B, namely:

1. What high-level financial policy objectives should the Reserve Bank have?
2. How should the Reserve Bank be governed?
3. What prudential regulatory tools and powers should the Reserve bank have?
4. How should the Reserve Bank enforce prudential regulation?

In summary:

1. Objectives: The purpose of all regulation, including banking regulation, should be to make the community better off than otherwise.
2. Governance: We support the in-principle decision to establish a proper governance board for the Reserve bank. We have given ongoing thought to who should be responsible for monitoring the Bank as a whole. Treasury or MBIE are two department options.
3. Tools and powers: We favour a standards-based approach to the core prudential rule-making power. This has the advantage of both parliamentary oversight and publication while preserving flexibility.
4. Enforcement: We consider the strategic approach to prudential regulation should be a matter to be determined by the Board of the Reserve Bank. We do not consider it should be prescribed in legislation.

 Download the PDF to read the full submission.