A new five-year Funding Agreement ratified by Parliament today ensures the Reserve Bank has resources for its existing and expanded roles, while reflecting tight control of underlying costs, Governor Alan Bollard said.
Unlike other Government agencies, the Bank’s operating expenditure is funded from income from investments under a five-year funding agreement between the Minister of Finance and the Governor, reflecting the Bank’s operational independence.
The current Funding Agreement, signed in April 2005 and varied in April 2008, expired at the end of June 2010. The new Funding Agreement sees the Bank’s operating expenditure increase from $46.9 million in 2009-10, to $47.8 million in 2010-11, and then increasing to $56.4 million by the final year, 2014-15.
Dr Bollard said the increase in expenditure reflects additional responsibilities Parliament has given, or is in the process of giving, to the Bank, as well as the initial stages of an upgrade of New Zealand’s bank notes, and the establishment of an office in Auckland.
“The Bank has been given responsibility for the prudential regulation of non-bank deposit takers, and, if legislation passes, will shortly take on responsibility for prudential oversight of insurers. We also have a new role to play in anti-money laundering and countering the financing of terrorism,” Dr Bollard commented.
“The new Funding Agreement provides for the early stages of an upgrade of New Zealand’s bank notes, which will be 15 years old by the end of the agreement. A new small office is also being established in Auckland to ensure on-going provision of key banking and market services in the event of a natural or infrastructure crisis in Wellington.”
Dr Bollard said the new five-year Funding Agreement has been negotiated in an environment of considerable scrutiny. The Bank was required to demonstrate value for money and tight control of underlying costs.