The monetary authorities and central banks

What are the important central banks, other than the RBNZ?

Bank of England (BoE), Reserve Bank of Australia (RBA), US Federal Reserve (Fed), European Central Bank (ECB)

what are the functions of central banks?

developing and implementing monetary policy, issuing currency, providing banking services for the government, overseeing the operations of the financial system, facilitating the payments system, Managing financial system liquidity and the government’s holding of foreign exchange

What was the original purpose of the Bank of England?

To act as a banker to the government.

Who sets monetary policy at the Bank of England?

The Monetary Policy Committee (MPC).

How many members are on the MPC?

9 (5 internal, 4 external).

What does the PRA (Prudential Regulation Authority) do?
A:

Prudentially regulates and supervises financial services firms e.g banks, credit unions, insurance companies.

Which agency in Australia is responsible for monetary policy and the payments system?

The Reserve Bank of Australia (RBA).

What does the Australian Prudential Regulation Authority (APRA) do?

Controls the risk-taking of financial institutions.

Which Australian agency regulates financial markets and protects consumers?

The Australian Securities and Investment Commission (ASIC).

How many independent agencies share the monetary authority role in Australia?

Three (RBA, APRA, ASIC)

What board is responsible for the RBA’s monetary policy and financial system stability policy?

The Monetary Policy Board.

Which RBA board sets payments system policy?

The Payments System Board.

What does the RBA’s Governance Board oversee?

The RBA’s organisational affairs and operations, including banking services, note issuance, payments operations, and other matters.

How many boards are within the RBA?

three

What is the RBA’S definition of monetary policy?

Management of short-term interest rates.

What are the three main objectives of monetary policy in Australia?

Maintenance of a stable currency, full employment, and the prosperity and welfare of the people of Australia.

What does "stable currency" mean in terms of RBA policy?

Low and stable inflation.

What is meant by "full employment" in Australia?

Enough jobs for all willing and available workers, acknowledging some short-term or structural unemployment.

How does monetary policy promote prosperity and welfare?

By creating a stable macroeconomic environment and ensuring financial stability.

What are the RBA’s three roles in the payments system?

Promote efficiency and stability, provide settlement facilities, and act as the government’s bank.

What are the main responsibilities of the RBNZ?

Monetary policy, systemic stability, and prudential regulation.

Who is responsible for RBNZ's monetary policy?

The Monetary Policy Committee (MPC).

Who is responsible for RBNZ’s operational decisions?

The Governance Board.

What are the three main objectives of the RBNZ under the 2021 Act?

Price stability (economic objective), financial system stability (financial stability objective), acting as New Zealand’s central bank (central bank objective)

How is the Monetary Policy Committee (MPC) structured?

It has 4 internal members (including the Governor) and 3 external members.

What does the MPC decide?

The Official Cash Rate (OCR). They review it 7 times a year.

What are the four key components of NZ's monetary policy framework?

The Remit, The Charter, The Code of Conduct, and The Monetary Policy Strategy.

What is the Remit in New Zealand's monetary policy?

A document that outlines the MPC’s objectives, set by the Minister of Finance.

What is the current operational objective in the Remit?

To achieve and maintain annual inflation between 1% and 3% over the medium term.

What are the three main components of the U.S. Federal Reserve system?

The Board of Governors, the Federal Reserve Banks, and the Federal Open Market Committee (FOMC).

Which part of the Federal Reserve holds most of the authority?.

The Board of Governors

How many members/ governors run the Board of Governors?

7

How are governors appointed to the Board of Governors?

Nominated by the President and confirmed by the U.S. Senate.

What additional role does the Chair of the Board of Governors hold?

Chair of the FOMC

What is the FOMC responsible for?

Setting national monetary policy.

How many voting members are on the FOMC?

12: seven board of governors members, the president of the Federal Reserve Bank of New York, and four other Reserve Bank presidents on a rotating one-year basis.

What are the main goals of the U.S. Federal Reserve’s monetary policy?

Promote maximum employment, stable prices, and moderate long-term interest rates.

What are the ojectives of the US Federal Reserve system?

Conduct monetary policy, promote financial system stability, foster the safety and soundness of individual financial institutions, enhance the safety and efficiency of payment and settlement systems, and promote consumer protection and community development.

What is the European Central Bank (ECB) responsible for?

Conducting monetary policy for the euro area.

How many states currently make up the euro area?

20 states.

What is the Eurosystem?

The European Central Bank and the 20 National Central Banks.

What are the main tasks of the Eurosystem?

Define and implement monetary policy, conduct foreign-exchange operations, hold/manage official foreign reserves, promote smooth payment systems, and contribute to financial system stability.

What two groups make up the Eurosystem?

the executive board and the governing council

what is the composition and purpose of the executive board?

6 member which govern the European Central Bank

what is the composition and purpose of the governing council?

6 executive board members and 20 national central bank governors decide on monetary policy.

What is the Bank for International Settlements (BIS)?

An international monetary authority

What is the primary role of the BIS?

Facilitating central banking cooperation.

How does the BIS facilitate cooperation?

By providing meeting places and resources for central bank meetings.

What financial role does the BIS play for central banks?

Acts as a bank for central banks, providing services related to their financial operations.