Frequently asked questions on New Zealand registered banks
14 June 2009
Q: I bank with “XYZ Bank”. Is my money safe with them?
Q: Is it
safe to keep my money in a bank at the moment?
The Reserve Bank of New Zealand (RBNZ) does not comment on individual banks and is not in a position to provide financial advice. Individual customers should talk with their banks or non-bank institutions. If you have any questions please call 0800 726 972.
The Governor of the Reserve Bank, Dr Alan Bollard, made press statements to reassure the public that the New Zealand financial system is sound, in recognition of the potential concerns arising from recent developments in overseas financial markets.
For information about the deposit guarantee scheme and for all enquires visit the Treasury website.
Links to Deposit Guarantee releases are below, for your information.
Deposit guarantee scheme introduced
12 October 2008
http://www.rbnz.govt.nz/news/2008/3462912.html
RBNZ and Treasury release detail of deposit guarantee scheme
12 October
2008
http://www.rbnz.govt.nz/news/2008/3462925.html
Reserve Bank announces further liquidity measure
9 October 2008
http://www.rbnz.govt.nz/news/2008/3461098.html
New legislation provides a strong basis for confidence
3 October
2008
http://www.rbnz.govt.nz/news/2008/3431765.html
Reserve Bank confident in NZ financial system
30 September 2008
http://www.rbnz.govt.nz/news/2008/3432764.html
We would also refer you to our six monthly Financial Stability Report (FSR) for a broader picture of the state of the financial system and the potential impacts of developments in overseas market.
Q: Is the NZ banking system currently sound and safe? Should we be
concerned?
Q: What is the current state of the NZ banking system?
Despite significant turbulence in the US and global financial markets recently, the New Zealand banking system remains sound.
The Governor of the Reserve Bank, Dr Alan Bollard, made press statements to reassure the public that the New Zealand financial system is sound, in recognition of the potential concerns arising from recent developments in overseas financial markets.
For information about the deposit guarantee scheme and for all enquires visit the Treasury website.
Links to Deposit Guarantee releases are below, for your information.
Deposit guarantee scheme introduced
12 October 2008
http://www.rbnz.govt.nz/news/2008/3462912.html
RBNZ and Treasury release detail of deposit guarantee scheme
12 October
2008
http://www.rbnz.govt.nz/news/2008/3462925.html
Reserve Bank announces further liquidity measure
9 October 2008
http://www.rbnz.govt.nz/news/2008/3461098.html
New legislation provides a strong basis for confidence
3 October
2008
http://www.rbnz.govt.nz/news/2008/3431765.html
Reserve Bank confident in NZ financial system
30 September 2008
http://www.rbnz.govt.nz/news/2008/3432764.html
We would also refer you to our six monthly Financial Stability Report (FSR) for a broader picture of the state of the financial system and the potential impacts of developments in overseas market.
Q: I have heard that banks have to hold a minimum 8% capital. What does this mean for my deposit with XYZ Bank?
The four systemically important banks in New Zealand are locally incorporated and are therefore subject to New Zealand law and the full range of the Reserve Bank’s prudential supervision powers and requirements. For information about the deposit guarantee scheme and for all enquires visit the Treasury website.
All registered banks must publish quarterly disclosure statements in New Zealand (available on their respective websites) and comply with prudential requirements determined by the Reserve Bank of New Zealand.
The prudential requirements, which for locally-incorporated banks include capital adequacy requirements (how much capital they have to hold) and limits on lending to connected persons, are contained in conditions of registration published in the disclosure statements. Banks are not subject to cash reserve requirements but locally incorporated banks must hold capital equal to at least 8% of risk weighted assets.
The Reserve Bank reproduces banks’ key information summary data on our website which shows the capital adequacy ratios and connected lending exposures of New Zealand-incorporated banks.
http://www.rbnz.govt.nz/statistics/banksys/g1/data.html
Q: Would the NZ Government/RBNZ inject money into a New Zealand bank that was in
trouble?
Q: If a NZ bank has a large number of mortgage defaults, would the
government/RBNZ step in with cash?
The Reserve Bank does not comment on individual banks and refers inquiries to public sources for further information.
For information about the deposit guarantee scheme and for all enquires visit the Treasury website.
Despite significant turbulence in the United States and global financial markets recently, the New Zealand banking system remains sound, and the Reserve Bank has re-stated that it retains full confidence in the underlying solvency of the New Zealand banking system. Links to Deposit Guarantee releases are below, for your information.
Deposit guarantee scheme introduced
12 October 2008
http://www.rbnz.govt.nz/news/2008/3462912.html
RBNZ and Treasury release detail of deposit guarantee scheme
12 October
2008
http://www.rbnz.govt.nz/news/2008/3462925.html
Reserve Bank announces further liquidity measure
9 October 2008
http://www.rbnz.govt.nz/news/2008/3461098.html
New legislation provides a strong basis for confidence
3 October
2008
http://www.rbnz.govt.nz/news/2008/3431765.html
Reserve Bank confident in NZ financial system
30 September 2008
http://www.rbnz.govt.nz/news/2008/3432764.html
The Reserve Bank of New Zealand Act requires the Reserve Bank to use its banking regulation and supervision powers to promote the soundness and efficiency of the New Zealand financial system, and to avoid significant damage to the financial system that could be caused by the failure of a registered bank. The Reserve Bank pursues these objectives using a mix of policies that promote effective governance by banks' boards of directors, that strengthen market scrutiny of banks, and that set certain minimum standards of risk management by banks.
Q: I bank with “XYZ Bank” who is owned by an Australian parent. What would happen if the Australian parent bank went into default/bankruptcy and how would this affect the New Zealand subsidiary and my deposit with the New Zealand subsidiary?
An Australian bank failure would be managed by Australian regulators – Australian Regulatory Prudential Authority, Reserve Bank of Australia and Australian Treasury. The implications for the New Zealand subsidiary would depend on the status of the New Zealand subsidiary. If the subsidiary was still fully capitalised, then it would remain as part of the Australian banking group, but the depositors of the subsidiary would still be fully covered by its assets. If the subsidiary was not fully capitalised, then the RBNZ has options, including statutory management, to manage the situation from the perspective of the subsidiary.
Q: Would the deposits of a New Zealand bank held with the Reserve Bank first be distributed to New Zealand customers prior to the Australian parent bank being able to claim any of the New Zealand subsidiary's assets?
In an insolvency event, the assets of a bank incorporated in New Zealand would be used to meet the obligations of the New Zealand entity. Under existing law, all unsecured creditors would be treated the same, although they would stand ahead of subordinated and equity claims.
Q: In a financial crisis affecting both Australia and New Zealand, what is the likelihood of the Australian parent bank transferring New Zealand assets/deposits out of NZ back to Australia?
We regard these types of dealings as an area of important prudential concern. We impose a number of constraints on banks, mainly through locally incorporated banks' conditions of registration, that are designed to limit the risks which these types of dealings might involve.
Systemically important banks in New Zealand must be locally incorporated and therefore subject to relevant aspects of New Zealand company law. These banks must have a New Zealand balance sheet and capital rules determined by the Reserve Bank of New Zealand. In addition, Australian bank owners are subject to equivalent constraints and banking supervision in their home jurisdiction (through the corresponding banking supervisory authority in Australia, namely the Australian Prudential Regulatory Authority), which helps to ensure that they conduct their affairs with integrity.
As a result of these types of conditions of registration, a New Zealand bank would be expected not to transfer any of its assets to an Australian owner without at least receiving payment in full for the fair value of the asset. This ensures that the transaction would not have any detrimental impact on the overall financial position of the New Zealand bank.
Q: What is going to happen to New Zealand’s interest rates?
The Reserve Bank does not comment on upcoming Official Cash Rate reviews. Refer to the schedule of upcoming Official Cash Rate releases.
