Reserve Bank of New Zealand
The Reserve Bank of New Zealand is New Zealand's central bank, and its
overall purpose is to maintain the stability and efficiency of the financial
system.
The Reserve Bank of New Zealand is the institution responsible for managing
New Zealand’s money supply and for preventing inflation or other severe economic
problems within New Zealand. The Reserve Bank, established in 1939, differs from
other major reserve banks (including the US Federal Reserve) in that it is
entirely government-owned and centralized, and the Reserve Bank thus takes a
much stronger hand than non-centralized reserve banks in regulating monetary
activities.
The Reserve Bank is directly and solely responsible for printing and
destroying New Zealand currency. Since the Reserve Bank is willing to accept
even non-legal tender as viable assets (including severely damaged currency or
coins and bills that have been withdrawn from active circulation), this makes
the New Zealand money supply slightly more stable than in some other countries,
albeit harder to track precisely.
The Reserve Bank also ensures a high measure of control over other New
Zealand banks by requiring a quarterly disclosure statement from all banks
operating in the country, giving the institution information about the financial
health of individual banks as well as detailed data about each bank’s
activities. The Reserve Bank also sets the Official Cash Rate (OCR), which can
be adjusted at eight regular intervals throughout the year, as well as at
unscheduled times in the event of an emergency. Due to the Reserve Bank’s policy
of lending unlimited amounts of money to individual New Zealand banks at above
or below the OCR, no bank can charge an interest rate higher than the OCR
without being undercut by Reserve Bank funds, making the OCR an unusually stable
interest rate nationwide.
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