Thursday 29 September 2016 11:42 AM
RBNZ to pay $140 million dividend from FX gains in greener years
By Paul McBeth
Sept. 29 (BusinessDesk) - The Reserve Bank will pay a $140 million dividend to the government, using up some of the near $1 billion of investment gains built up from prior years.
The central bank paid a $510 million dividend to the government in 2015, a year when a falling kiwi dollar generated gains for the RBNZ's holdings of overseas currencies. The Reserve Bank's dividend policy is to distribute excess equity to the Crown, and should generally hold on to unrealised gains unless it believes there's a high probability of that windfall being crystallised.
The recovery in the kiwi dollar through the period meant the Reserve Bank reported net losses on foreign exchange of $201 million, compared to a net gain of $379 million a year earlier, of which $134 million was realised in 2016. However, having accumulated gains of $974 million, there was sufficient equity to allow for a return, the RBNZ's annual report shows.
The $140 million return brings the central bank's dividend in line with 2012 and 2013, with last year's half-billion dollar return an anomaly, while a $20 million payment in 2014 was smaller to allow the RBNZ to hold on to some gains to bolster its equity.
The central bank reported a profit of $52 million in the 12 months ended June 30, down from $624 million in 2015 when earnings were bolstered by FX gains. The bank's operating expenses increased to $71.2 million from $70.6 million a year earlier, due to the capitalisation of costs associated with projects to improve the payments and treasury systems and an acturial loss on a staff pension scheme. Staff costs fell 8 percent to $32 million.