Strategic direction

VISION & VALUES

Vision

The Reserve Bank’s vision is to promote a sound and dynamic monetary and financial system.

Values 

It endeavours to achieve this vision by being a high-performing small central bank, with values of:

Integrity

Being professional and exercising sound judgement

Innovation

Actively improving what we do

Inclusion

Working together for a more effective Bank.

Outcomes

The Bank contributes to the Government’s goal of improving New Zealand’s economic performance by targeting three outcomes.
These are designed to foster confidence and stability in New Zealand’s financial system by:

  • maintaining stability in the general level of prices;
  • maintaining a sound and efficient financial system; and
  • providing legal tender to meet the currency needs of the public.

Functions

To achieve these outcomes, the Bank’s functions cover:

  • monetary policy formulation;
  • financial market operations;
  • macro-financial stability;
  • prudential supervision;
  • settlement services; and
  • currency operations.

These functions, the links between them through the outcomes targeted, and the measures used to evaluate performance are shown below.

Strategic direction

RESERVE BANK GOAL AND OUTCOMES 2015-16

Goal

Improved economic performance.

Outcomes 

  • Price stability maintained

  • Sound and efficient financial system maintained

  • Currency needs of the public are met.

Functions

To achieve these outcomes, the Bank’s functions cover:

  • monetary policy formulation;

  • financial market operations;

  • macro-financial stability;

  • prudential supervision;

  • settlement services; and

  • currency operations.

These functions, the links between them through the outcomes targeted, and the measures used to evaluate performance are shown below.

Functional outcomes

Monetary policy formulation 

Stability in the general level of prices.

Success measures
  • Reserve Bank forecasts of CPI inflation should be comfortably within the target range in the second half of our forecast horizon, and near the 2 percent target midpoint.

  • Measures of underlying inflation should generally remain within the target range.

  • Unnecessary instability in output, interest rates and the exchange rate should be avoided.

  • Monetary Policy Statements are informative and accurately assess the Bank’s performance in meeting the objectives of the Policy Targets Agreement.

Financial market operations 

  • Adequate banking system liquidity

  • Short-term interest rates consistent with monetary policy

  • Confidence in the efficient functioning of New Zealand financial markets

  • Foreign reserves available for efficient foreign exchange intervention and crisis management.

Success measures
  • Short-term wholesale interest rates are maintained at levels close to the OCR.

  • No evidence of payment disruptions due to a shortage of settlement cash in the system, e.g., persistent accessing of the Overnight Reverse Repo Facility.

  • Over the medium term, domestic market operations generate a positive return.

  • Foreign reserves are maintained at target levels, with liquidity and credit standards met throughout.

  • The Foreign Reserves Management portfolio yields a net return on assets that meets or exceeds the benchmark portfolio.

  • The foreign exchange open position is managed such that:  
  1. the bulk of active foreign exchange purchases (sales) are undertaken around peaks (troughs) in the exchange rate cycle; and
  2. the net return on the non-core open foreign exchange position is positive over the cycle.

Macro-financial stability 

A sound and efficient financial system that supports the functioning of the economy.

Financial stability, promoted by:

  • Increased resilience of the domestic financial system during periods of extreme credit growth and rising leverage or abundant liquidity; and

  • Dampening of excessive growth in credit and asset prices.

Success measures
  • Significant risks to domestic financial systems stability are identified and monitored.

  • Appropriate instruments to counter risks to financial stability are deployed in a timely and effective manner, and any potential impacts on monetary policy are understood.

  • An assessment of the soundness and efficiency of the financial system is published twice yearly in the Financial Stability Report, including the reasons for, and the impact of, any use by the Bank of macro-prudential policy instruments.

  • Information on the risk assessment framework, including the macro-prudential indicators that are used to guide policy settings, is published in a manner that assists the assessment of financial stability.

  • Statistics are collected to enable an appraisal of the soundness and efficiency of the financial system, and are published in accordance with the principles and protocols of New Zealand’s Efficient Statistics System.

Prudential supervision 

International and local confidence in New Zealand’s financial system.

Success measures
  • The bank, non-bank deposit taker and insurance regulatory regimes, and in particular the regulatory changes implemented during the year, promote the soundness and efficiency of the financial system in a cost-effective manner, as demonstrated by sound regulatory impact analysis.

  • The Reserve Bank’s prudential oversight of banks, NBDTs, insurance companies and payment systems identifies emerging financial stresses in a timely manner; and the Bank is prepared, where necessary, to effectively resolve institutional failures in conjunction with Government.

  • The Bank demonstrates a consultative and transparent approach to its policy development, supported by robust analysis that is understood by regulated institutions and stakeholders.

  • In its decisions on whether to grant licences to new applicants, the Bank takes a consistent approach within the legislative framework, without successful challenges.

  • The Bank’s AML/CFT supervisory activities demonstrate an appropriate risk-based approach to supervision of reporting entities within the Bank’s sector.

Settlement services 

An efficient, reliable and secure payments system that supports the smooth functioning of the economy.

Success measures
  • Availability of ESAS/NZClear during core hours is at least 99.90 percent, as measured over a year.

  • Customer satisfaction with operations and with system development is demonstrated through an annual customer survey in which an approval level of 90 percent or more is achieved.

  • All risks are well managed, as demonstrated by external audits for ESAS and NZClear.

  • International standards for payment and settlement systems (CPSS and IOSCO) are complied with, subject to variations for local New Zealand conditions.

Currency operations 

Legal tender that meets the currency needs of  the public.

Success measures
  • All orders for notes and coins from banks that meet the Reserve Bank’s guidelines are supplied within agreed times.

  • Notes and coins in general circulation are of a good quality as indicated by surveys of the condition of currency in circulation.

  • The number of counterfeit notes in circulation should be fewer than 10 per million notes in circulation.

  • Stakeholders are well informed and prepared for the introduction of Series 7 banknotes.

  • Currency is available to the public to meet planned and unplanned demand.