They manage what are often among the largest foreign asset portfolios in the economy, and can have extensive credit exposure to individual financial intermediaries. I turn now to how the RBNZ seeks to manage these risks.
New Zealand’s institutional arrangements are designed to limit the very large financial risk that the central bank could incur from its foreign exchange operations, and also to avoid the bank acquiring substantial contingent liabilities on behalf of the government (“the Crown”) through its liquidity and lender-of-last-resort operations.