6 August 2024
Don Richards
[FYI request #27559 email]
Dear Don
Official information request relating to interest paid on settlement accounts
We refer to your Official Information Act 1982 (OIA) request of 10 July 2024. You have requested the
following information:
1. Please provide the interest RBNZ has paid on settlement balances for each of the past five
financial years.
2. Please confirm the amount for each year that wil be or has been (a) reimbursed by the Treasury
to RBNZ or (b) reflected in a reduced dividend payment to the Treasury.
The Reserve Bank of New Zealand – Te Pūtea Matua (RBNZ) both receives and pays interest at rates
equal to, or near, the Of icial Cash Rate (OCR) in order to implement monetary policy and support
financial system liquidity. The RBNZ pays daily interest at the rate of the OCR on settlement accounts
(accounts that banks hold with the RBNZ for daily transactions). This is the main way the RBNZ
implements monetary policy.
More information is available in the RBNZ bul etin
How the Reserve Bank Implements Monetary Policy
and can be accessed at the fol owing link:
https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/publications/bulletins/2023/how-the-
reserve-bank-implements-monetary-policy.pdf
The RBNZ can also lend to banks, typical y at rates close to the OCR. A summary of liquidity facilities is
available on the RBNZ website at this link:
https://www.rbnz.govt.nz/financial-markets/domestic-
markets/our-monetary-policy-implementation-framework/key-facilities/facilities-at-a-glance
Typical y, banks have more cash deposited with the RBNZ than owed to the RBNZ. Other things may
contribute to the RBNZ’s overal net investment income including interest on its investments, such as in
foreign reserves.
RBNZ Annual Reports, including those from 2018-2019 to 2022-2023, which provide the financial
information for the last five years you have requested, can be found at the fol owing link:
https://www.rbnz.govt.nz/about-us/responsibility-and-accountability/our-annual-
reports#sort=%40computedsortdate%20descending
For example, the RBNZ Annual Report for the 2022-2023 financial year sets out net investment income
of $338 mil ion, at Note 18 on page 148. The interest paid to banks on settlement accounts (at the OCR)
is recorded within this under “Interest Expense from Financial Liabilities Measured at Amortised Cost” in
the line item “Settlement Institution Deposits”.
Any operating surplus made by RBNZ contributes to higher capital, which is then considered for
distribution to the Government by way of a dividend. This is considered each year, at the end of the
financial year (noting that some years this has led to no dividend being paid, including in 2019-2020,
2021-2022, and 2022-2023). The RBNZ’s operating expenditure is determined by a 5-year funding
agreement agreed with the Government. The funding agreement specifies how much of the RBNZ’s
revenues can be retained by RBNZ to meet its operating costs.
The RBNZ Annual Report for 2022-2023 (which can be found at the link provided earlier) contains further
information and explanation of the process for considering and deciding a dividend. We refer you to
the fol owing sections of the Annual Report:
• Page 59 contains the dividend principles.
• Page 72 contains information on the dividend for 2022/23 along with a graph of any dividends
in the previous five financial years.
• Pages 132-133 contains information on the management of RBNZ’s capital and any potential
dividend. There is also a table showing the components of equity, including the amount of
unrealised gains, and sets out how equity, excluding unrealised gains is compared with target
capital to arrive at the recommendation for a dividend for the 2022-2023 financial year.
You have the right to seek an investigation and review by the Ombudsman of this OIA response.
Information about how to make a complaint is available at
www.ombudsman.parliament.nz or
freephone 0800 802 602.
Please note that we intend to publish a copy of this response on the RBNZ website at
www.rbnz.govt.nz/research-and-publications/of icial-information-requests. Responses to requests are
published in order to improve public transparency and provide an additional resource for anyone
seeking information.
Yours sincerely
Government and Industry Relations
Reserve Bank of New Zealand – Te Pūtea Matua
Document Outline
