Reserve Bank of New Zealand

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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to accept even non-legal tender as viable assets (including severely damaged currency or coins and bills that have been withdrawn from active circulation), this makes the New Zealand money supply slightly more stable than in some other countries, albeit harder to track precisely.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.


Links

Reserve Bank of New Zealand - Official Web site


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