Supervision of overseas owned banks essential

The Reserve Bank of New Zealand has announced that it is seeking to reinvigorate the regulatory arrangements for New Zealand’s banking system because, even though all the main banks in New Zealand are overseas owned, it still needs to be vigilant about its banking supervision role.

Speaking at the Trans-Tasman Business Circle in Sydney, Reserve Bank Governor Dr Alan Bollard advised that the Reserve Bank of New Zealand would be seeking to work more closely with the Australian Prudential Regulation Authority on how best the two organisations can coordinate their efforts to address both day-to-day prudential supervision and crisis management.

Dr Bollard stated that the reason systemically important banks in New Zealand are required to be incorporated locally, and are required to maintain the capacity to function on a stand alone basis, is that New Zealand authorities must be able to supervise the banking system and to respond quickly, decisively and effectively to a banking crisis.

Noting that the New Zealand banking system consists of predominantly Australian-owned banks, Dr Bollard identified an opportunity to develop arrangements for the supervision of trans-Tasman banks that would be a world class model of cross-border banking supervision.

Dr Bollard reiterated his message in a presentation to a US Federal Reserve conference on bank insolvency in Chicago, including a discussion of the ways foreign and domestic regulatory authorities can better co-operate and co-ordinate their actions, including in the case of Australia and New Zealand.

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