Reserve Bank staffing levels and personal costs surge over past five years as it takes on broader role

The Reserve Bank has doubled staff numbers in five years to 510, with its personnel costs rising to $80 million this year from $32 million in 2018.

The significant increase in full-time equivalent staff and personnel costs has come as the central bank and prudential regulator has stepped up the oversight of banks, insurers and non-bank deposit takers such as finance companies, credit unions and building societies, and seen its responsibilities extended through the likes of the Reserve Bank of New Zealand (RBNZ) Act 2021, and more recently the Deposit Takers Act.

This is outlined in the Reserve Bank's June year annual report, issued Thursday.

"We spent $80 million on personnel in 2022/23. This funded all forms of remuneration, including superannuation contributions, redundancy payments and short-term benefits," the Reserve Bank says.

The $32 million in 2018 covered remuneration, direct spend on training and redundancy payments.

The RBNZ Act 2021 and the Deposit Takers Act (DTA), passed into law in July, replace the RBNZ Act 1989. Interest.co.nz asked a Reserve Bank spokesman for further detail on the key areas where intensification of supervision and expanded requirements under the RBNZ Act 2021 have led to staffing increases.

A Reserve Bank spokesman says since the RBNZ Act 2021 was passed, it has been strengthening its "supervision presence" in Auckland and Wellington in preparation for the DTA, which includes a Depositor Compensation Scheme. This involves "increasing our regulatory perimeter" across the banking and non-bank deposit taking sectors.

"Furthermore, in 2023 we completed the implementation of our new enforcement framework, resulting in an increase in staffing levels in both our enforcement and resolution teams," the Reserve Bank spokesman says.

"Implementation of the DTA requires a significant uplift in our staffing levels to deliver on our ongoing financial stability responsibilities. This includes an uplift in staffing all functional areas of our financial stability group, including prudential policy, prudential supervision, specialist supervision, enforcement and resolution, and financial stability assessment and strategy. This reflects the substantial lift overall in our financial stability mandate."

"The DTA implementation has also required an uplift in staff across both data, statistics and analytics; and knowledge and information management, reflecting the increased need for greater data gathering requirements, tools and processes. We have also increased staffing in our risk, compliance and legal space, reflecting the greater requirement for legal and legislative knowledge and expertise to meet our responsibilities within the DTA," the spokesman says.

 Funding increase not has big as sought after Treasury baulked

The Reserve Bank's June 2020 five-year funding agreement with the Government provides funding from 1 July 2020 to 30 June 2025 of $640 million. That's almost double the $324 million over the five previous years. However, an additional funding request was made to Minister of Finance Grant Robertson for the last two years of the latest five-year agreement due to "new legislative requirements and required investment."

Cabinet agreed to a $79 million increase in August. This increase came after the Reserve Bank had sought an increase of $138.361 million, which Treasury thought was excessive, saying instead the Reserve Bank should receive $58.049 million, or potentially $79.253 million.

This level of additional funding could be justified, Treasury said, to fund requirements for the DTA, Depositor Compensation Scheme and Project Waitoa, which will develop and implement new vaulting and cash processing infrastructure. These are "high priority legislative and critical infrastructure programmes of work not currently funded" within the five-year agreement, Treasury said.

Treasury said it didn't support increased funding for core Reserve Bank operating expense categories because the 2020 five-year funding agreement "should have provided sufficient resources to manage service delivery risks." 

Capital increased to $4.2 bln

As previously reported by interest.co.nz, the Reserve Bank has reviewed foreign reserves and other financial resources to determine the level of capital and indemnities considered adequate to cover what it describes as "a prudent range of potential financial losses that may arise in severe but plausible scenarios in order to meet its monetary policy, financial stability and liquidity management objectives."

This led to Robertson in May agreeing to a capital injection of $500 million to manage the financial risks associated with the central bank's Foreign Reserves Co-ordination Framework. Then in July the Crown provided an indemnity in relation to foreign reserves losses for the purpose of monetary policy or financial stability interventions. In August Cabinet agreed to increase the Reserve Bank’s financial resources via a $1.3 billion capital injection. And in September the Reserve Bank and Robertson agreed to a $5 billion standing indemnity for domestic policy tools, primarily to support financial stability interventions.

"The total $1.8 billion in additional capital brings the Reserve Bank’s target capital level to a recommended minimum of $4.2 billion for the 2022/23 dividend assessment," the Reserve Bank says.

No dividend was paid this year. The Reserve Bank, which creates and issues NZ money, last paid the Government a dividend - $140 million - in 2021. The Reserve Bank's target capital level is reviewed annually.

Balance sheet shrinks a bit

Meanwhile, assets on the Reserve Bank's balance sheet dropped $5 billion year-on-year as it began selling government bonds bought during the 2020-2021 large scale asset purchase (LSAP) programme to Treasury's New Zealand Debt Management unit. However, assets still stood at $88.9 billion, more than double the $42.3 billion of March 2020. The Reserve Bank expects the LSAP programme to be wound down by 2027.

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