Reserve Bank Email Service
NEWS RELEASE
Date 2 October 2008 Time 3:30pm
Reserve Bank releases Annual Report
The Reserve Bank is in good shape to deal with current macroeconomic and financial stresses, Governor Alan Bollard said
today when releasing the Bank's 2007-2008 Annual Report, covering the year to 30 June 2008.
"We are a full-service central bank," Dr Bollard said. "That means we do monetary policy, bank supervision, payment and
settlement services, currency, liquidity and foreign reserves management all in one building. In addition, we maintain
close relations with The Treasury and other parts of Government. In principle, that means we are better placed than some
of our offshore colleagues - where these functions are split - to identify economic-financial stresses and do something
about them."
Dr Bollard said the Bank has done a lot of work over the past few years to prepare for market stresses. These
developments are described in the Annual Report.
"They include work to improve the robustness of the financial system: improved bank surveillance, better bank
governance requirements, new Reserve Bank liquidity measures, minimum bank liquidity requirements, refreshed and
extended payment and settlements technologies, stress testing, and new regulation planned for non-bank financial
institutions and the insurance industry.
"The Bank is also using its balance sheet differently. We have a new foreign exchange policy to help smooth peaks and
troughs in the exchange rate. In addition, we have built up a planned open foreign exchange position to give us more
leverage in the event of severe volatility in the markets. We have a new capital injection from the Government, and have
invested in a more sophisticated treasury management system."
Dr Bollard said the Bank continues to develop its macroeconomic analysis tools, which now include a suite of
data-driven forecasting models, and a new central forecasting and policy model. It has done considerable work on the
effects and management of a slowing economy.
The Bank spent a net $38.1 million on activities covered by its Funding Agreement, which was 7.1 percent below the $41
million in the Agreement. The Bank generated a surplus of $535 million. Gross mark-to-market gains on the Bank's open
foreign exchange position were $344 million. A dividend of $168 million has been paid to the Crown.
The Annual Report includes a pictorial supplement illustrating where the Bank's funding comes from, where this is
invested, what incomes it derives and how this is spent. This is a new initiative aimed at providing a simple overview
of the Bank's finances for the lay reader. The Annual Report can be viewed on the Reserve Bank website
(www.rbnz.govt.nz).
ENDS