RBNZ more than triples dividend to NZ$630 mln after huge foreign exchange intervention gains

The Reserve Bank of New Zealand released its annual report for 2008/2009 showing it made foreign exchange gains of NZ$481 million during the year after it intervened to sell New Zealand dollars from mid-2007. The RBNZ announced a net profit of NZ$906 million for the year, up from NZ$535 million the previous year. It paid a NZ$630 million dividend to the government, more than triple its NZ$168 million dividend in 2008. Here is the RBNZ's statement accompanying the release:

New Zealand has escaped major damage in the worst global financial crisis in decades, but the experience has highlighted imbalances and vulnerabilities, the Reserve Bank says in its 2008-2009 Annual Report released today. "Prior to the crisis, households had been consuming beyond their incomes, borrowing heavily offshore through their banks. In the past two years there has been a substantial correction in household savings and the external payments imbalance. However, further improvements will be needed to stop our international debt position from mounting further," Reserve Bank Governor Alan Bollard said today, when releasing the Annual Report. The recent appreciation of the exchange rate has not supported the shift towards the export and import-competing industries that will be necessary to improve this situation, he added. "On these trends, there is a real risk that recent improvements in the external balance will be reversed." The Report notes the importance of the Bank's full-service role, enabling it to integrate its policy tools across monetary policy, financial stability and prudential supervision. "In response to the financial crisis we coordinated a range of policy measures, including the fastest and furthest fall in the OCR on record, and ensuring banks could obtain funding by allowing them to borrow from the Reserve Bank, using a broader range of facilities and collateral," Dr Bollard said. He said there were important lessons from the experience of the last few years. "International regulators are likely to require better tools to regulate financial systems over the economic cycle, including stronger liquidity and capital adequacy standards. We will assess these developments in the New Zealand context as they emerge. In the meantime the Bank has introduced a new prudential liquidity policy for banks which aims to address the main vulnerability of the New Zealand system that was exposed during the crisis." He also noted that, in the wake of considerable weakness in the non-bank sector over recent years, progress is well underway to implement the new prudential regime for non-bank deposit takers. The Bank's crisis liquidity measures and earlier foreign exchange intervention carried risks to the Bank's balance sheet that continued to require careful management. The Bank's total assets expanded over the year to 30 June 2009 by approximately $6 billion, to reach $31 billion. The Bank's equity at 30 June was $3.0 billion. Dr Bollard said that significant reductions in interest rates and exchange rates in the 2008-09 financial year meant that the Bank recorded a net profit of $906 million and paid a dividend of $630 million to the Government. "This is a strong financial result which reflects abnormally large changes in market conditions," Dr Bollard said. However, he warned that the Bank's future financial performance can be expected to be more volatile than it has been in recent years. In recognition of the seriousness of the financial crisis, the Governor, Deputy Governor and two Assistant Governors requested they be given no remuneration increase in calendar year 2009.

Here is the full annual report. We welcome your insights and comments on the details in the report: rbnz_2009_ar