Apart from the years 1850–1856, trading banks issued their own bank notes until the Reserve Bank of New Zealand was established in 1934. In 1850 the government set up a bank of issue with a monopoly on issuing bank notes. It aimed to ensure there was sufficient and stable currency. However, the public was suspicious about exchanging coin for the bank’s notes. The enterprise was unprofitable; mostly because it had to hold reserves in the United Kingdom where interest rates were much lower than in New Zealand. The Bank Paper Currency Act of 1856 again allowed trading banks to issue bank notes and the Colonial Bank of Issue was wound up.
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