Central bankers must continue to look forward to guard against the unpredictable, Deputy Governor Geoff Bascand says in a speech published today.
Mr Bascand joined the Reserve Bank of New Zealand – Te Pūtea Matua in 2013 during the aftermath of the Global Financial Crisis. Central banks were reflecting on monetary and financial stability policies and planning how to avoid another financial crisis in the future.
“We became a fast follower of the emerging practice of macro-prudential policies and their interaction with monetary policy looms just as large today as it did then. While it can be challenging to find the right calibration and get the goals and limitations of macro-prudential policies understood, they will remain an important policy tool in years to come,” Mr Bascand says.
“I’ve learned that in the business of central banking, calm seas are rare. The single most important thing we as central bankers can do is to ensure the economy and the financial system in particular is highly seaworthy at all times. This means building resilience, maintaining private sector and public-policy buffers that can be drawn on when required, and having enough policy flexibility to be able to exercise a variety of tools and settings when needed.”
Our policy focus in recent years has been to strengthen regulated entities’ resilience and compliance. There is still work to do to complete this ‘uplift’, continuing to mature governance and risk management practices. The continued identification of historical compliance issues testifies to the ongoing need for firms to pursue positive assurance processes and lift investment in systems, processes and compliance.
“While our work is never done, we can take pride in the steps taken. I am confident our financial stability approach has strengthened, the foundations are more solid, and most of all our broader sector and industry engagement stand us in good stead to keep learning from one another.”
Overall, the next ten years are likely to see a greater concentration on efficiency, industry dynamics, technological innovation and how financial institutions meet customer needs. Insurance affordability and risk-based pricing, open banking, and digital money are just some of the dynamic challenges the sector and regulators will face.
Mr Bascand, who is leaving the RBNZ in January, gave thanks to his colleagues and stakeholders for their ongoing support.