The Reserve Bank of New Zealand (RBNZ) () is the central bank of New Zealand. It was established in 1934 and is currently constituted under the Reserve Bank of New Zealand Act 2021. The current governor of the Reserve Bank, Anna Breman, is responsible for New Zealand's currency and operating monetary policy.
History
The Reserve Bank of New Zealand was established from 1 August 1934 by the Reserve Bank of New Zealand Act 1933. The Reserve Bank first issued banknotes in 1934, see New Zealand pound.
The Banking (Prudential Supervision) Act 1989, which came into effect in February 1990, resulted in the Reserve Bank becoming independent of government control in RBNZ's role of managing monetary policy by introducing an inflation targeting mandate. New Zealand was the first country in the world to try this regime, which was later adopted in other countries.
The Reserve Bank of New Zealand Amendment Act 2008 included amendments to the BPSA 1989, including the introduction of capital requirements for deposit takers.
The Non-Bank Deposit Takers Act 2013 gave RBNZ the role of prudential regulator and licensing authority for non-bank deposit takers.
In December 2018, the Sixth Labour Government of New Zealand passed the Reserve Bank of New Zealand (Monetary Policy) Amendment Act 2018, which created the bank's monetary policy committee and codified "maximum sustainable employment" as an objective of monetary policy alongside price stability.
In 2021, the Parliament passed the Reserve Bank of New Zealand Act 2021, which created a new statutory governance board that was appointed by the Governor-General of New Zealand on the advice of the Government and Reserve Bank Governor. The RBNZA 2021 also designated the New Zealand Treasury as the bank's external monitor, mandated that the bank publish annual performance expectations and financial risk management statements, and establish a new Foreign Reserves Coordination Framework.
2021 also saw the Financial Market Infrastructures Act 2021 enacted, creating a regulatory regime for financial market infrastructures.
In December 2023, the Sixth National Government of New Zealand passed the Reserve Bank of New Zealand (Economic Objective) Amendment Act 2023 eliminating the "maximum sustainable employment" objective.
In February 2026, the Sixth National Government initiated a review of the Reserve Bank's decisions during the COVID-19 pandemic to lower the Official Cash Rate to 0.25 and inject NZ$55 million worth of digital money into the New Zealand economy. In September 2026, this independent review led by former Reserve Bank assistant governor David Archer and Massachusetts Institute of Technology professor Athanasios Orphanides found that the Reserve Bank was too slow to raise interest rates during the COVID-19 pandemic in New Zealand, resulting in record high inflation and a lack of price stability. The review also found that the previous Labour Government's dual mandate for the Reserve Bank had resulted in a record low unemployment rate of 3.2 percent.
Museum
The Reserve Bank Museum, based at the bank's headquarters in Wellington Central, has been open to the public since 2006.
Ownership The Reserve Bank has been wholly owned by the New Zealand Government since 1936. The Reserve Bank is established by the Reserve Bank of New Zealand Act 2021 and has statutory independence. The Reserve Bank is accountable to Parliament and provides an annual dividend to the Government.
Monetary policy
Since 1990, the Reserve Bank is responsible for the independent management of monetary policy in New Zealand.
Monetary policy committee The RBNZ's Monetary policy committee, MPC, consists of internal and external committee members and has a mandate to set the Official Cash Rate and broader monetary stance to deliver low, stable inflation. replaced a single‑governor model in 2019. It has a mandate to maintain price stability through Inflation targeting. The degree of price stability is determined through a Policy Target Agreement with the Minister of Finance.
Inflation targeting
Official Cash Rate
Maximum sustainable employment Between 2019 and 2023 New Zealand moved from a strict price‑stability regime to a dual mandate of price stability and maximum sustainable employment, MSE, implemented via the MPC and flexible inflation targeting. MSE was treated as an unobservable benchmark inferred from a set of labour‑market indicators, with particular attention to cyclical measures such as underutilisation and youth/Māori unemployment.
Fractional-reserve banking
Like all modern monetary systems, the monetary system in New Zealand is based on fiat and fractional-reserve banking. In a fractional-reserve banking system, the largest portion of money created is not created by the Reserve Bank itself. Private sector commercial banks create 80% or more.
Issuing of currency The bank by virtue of the Reserve Bank Act has the sole right of issuing New Zealand legal tender notes and coins. The Reserve Bank controls the issuing of currency to banks and also replaces used and damaged money from circulation. In March 2005, the bank decided to remove the 5 cent coin from circulation (the following year), as well as reducing the size of 10, 20 and 50 cent coins.
The Reserve Bank accepts all New Zealand currency for payment at face value. This applies to all demonetised or withdrawn currency, however such currency need not be accepted by money changers as it is no longer legal tender. All decimal notes are legal tender except $1 and $2 notes as these have been withdrawn. Damaged notes are still worth something so long as they are recognisable. The Reserve Bank website notes that as a rule of thumb if there is more than half a bank note they will pay its full value. To receive payment people have to turn in the note to either the Reserve Bank in Wellington or any bank.
New Zealand Banknotes are signed by the RBNZ Governor. Between 1940 and 1984 they were signed by the RBNZ Chief Cashier, the first of whom was T. P. Hanna.
Central Bank Digital Currency The RBNZ has been evaluating the pros and cons of issuing a central bank digital currency since 2018. In April 2024, the RBNZ held a public consultation on the move toward a digital dollar. This digital currency would coexist with physical cash while offering privacy, security, and trust for users.
Collectors coins The Reserve Bank from time to time produces limited runs of legal tender coins for collectors and have a New Zealand theme and design. These coins generally do not circulate, but are legal tender. The coins are sold for the Reserve Bank via New Zealand Post's business unit.
Prudential regulation The Reserve Bank is responsible for the Prudential regulation of the New Zealand banking system to ensure that the system remains healthy, however it does not guarantee that a bank will not fail, or face problems. there are 27 registered banks.
Capital Adequacy, BS2
New Zealand-incorporated registered banks are required to maintain a minimum level of capital relative to their risk-weighted assets, measured by their Capital adequacy ratio. This helps ensure that banks have enough money to cover any losses they might incur.
Liquidity, BS13
policy mandating the minimum amount that a commercial bank must hold in liquid assets. The liquidity policy of New Zealand's locally incorporated registered banks is primarily governed by two banking prudential requirements documents: 'Liquidity policy' (BS13) and 'Liquidity policy annex – liquid assets' (BS13A). These documents are part of the banks' conditions of registration. Additionally, reporting requirements are imposed under section 93 of the Banking (Prudential Supervision) Act 1989.
Disclosure, BS7 All registered banks operating in New Zealand must issue a quarterly disclosure statement, which the Reserve Bank scrutinise. The purpose of these disclosure statements is to assist depositors to make sound decision and encourage banks to maintain sound banking practices
The disclosure comprises: A key information summary that provides a brief overview of the bank's financial condition General disclosure statement to provide comprehensive information on the bank Supplemental disclosure statement
Credit Ratings Under section 80 of the BPSA 1989, the RBNZ requires that all registered banks must have a valid credit rating for their long-term, senior, unsecured obligations in New Zealand dollars. These ratings, provided by independent agencies, assess a bank's financial stability and likelihood of repaying its debts. The RBNZ maintains a register of these ratings for each registered bank, which are also disclosed in the banks' semi-annual statements.
Outsourcing, BS11 The RBNZ outsourcing policy, Banking Standard 11, applies to large New Zealand-incorporated registered banks. Outsourcing occurs when a bank uses another party to perform business functions that would traditionally have been undertaken by the bank itself. Common examples include IT processing, accounting, and call centers. The outsourcing policy aims to ensure that large banks have the legal and practical ability to control and execute outsourced functions. It ensures that outsourcing arrangements do not compromise a bank's ability to be effectively administered under statutory management and operate for the purposes of continuing to provide and circulate liquidity to the financial system and the wider economy. The bank must be able to facilitate basic banking services by any new owner of all or part of the bank. They must also address the impact of service or function provider failures on the bank's ability to carry on its business. Large banks must achieve specific outcomes, including:
Meeting daily clearing, settlement, and other time-critical obligations. Monitoring and managing financial positions (credit, liquidity, and market risk). Providing basic banking services to existing customers, including liquidity and account activity reporting.
Connected Exposures, BS8 NZ registered banks are required to report their large exposures to RBNZ. This includes not only the large exposures but also the 20 largest exposures, even if they do not meet the large exposure threshold.
Connected exposures occur when multiple counterparties are linked through control relationships or economic interdependence. For example, if one company controls another, or if the financial health of one entity directly affects another, they are considered connected.
The Basel Committee on Banking Supervision (BCBS) has set guidelines to limit large exposures. A large exposure is defined as any exposure that is 10% or more of a bank's Tier 1 capital. For global systemically important banks (G-SIBs), the limit is stricter, capping exposures to other G-SIBs at 15% of Tier 1 capital.
These regulations aim to prevent banks from incurring significant losses due to the default of a single counterparty or a group of connected counterparties. This helps in maintaining the stability of the financial system by reducing the risk of cascading failures.
Open Bank Resolution, BS17 'Open Bank Resolution (OBR)' is a tool for dealing with a bank failure. OBR allows authorities to reopen a failed bank the next day under statutory control. It seeks to prevent abrupt disruptions to the bank's essential functions. while a long-term solution to the bank's failure is found, customers can promptly access their accounts to make and receive payments. OBR places the cost of a bank failure on the bank's shareholders and creditors, rather than taxpayers. Shareholders lose their investment first, followed by creditors if necessary. Creditor claims may be frozen to absorb losses, and they may suffer financial loss if the bank is unable to satisfy its obligations. In the absence of OBR, the only ways to deal with a bank failure are liquidation, government bailout, or acquisition by a competitor.