Banking system oversight
The Reserve Bank registers and supervises banks in New Zealand for the purposes of promoting the maintenance of a sound and efficient financial system, and avoiding significant damage to the financial system that could result from the failure of a registered bank.
While the Reserve Bank monitors registered banks’ compliance with banking supervision policies, neither it nor the Government guarantees that a registered bank will not get into difficulty or fail.
Part 4 of the Reserve Bank of New Zealand Act 1989 (see Our legislation) places restrictions on the use of the words “bank”, “banker”, “banking” and their derivatives. Those restrictions do not apply to banks registered under Part 5 of the Act which establishes the Reserve Bank’s bank registration and supervision functions and sets out its related powers and the purposes for which those powers must be exercised.
The Banking Supervision Handbook
The Banking Supervision Handbook contains the policy documents and Orders in Council setting out the details of our banking supervision framework pursuant to Part 5 of the Act.
Proposed changes to banking supervision policy
In August 2010 the Reserve Bank issued a consultation paper (PDF 497KB) proposing major changes to its disclosure regime for registered banks. A further consultation will follow in November on the changes needed to the disclosure Orders in Council to implement the changes decided on in the light of this consultation. The changes are intended to take effect for the disclosure period ended 31 March 2011.
The deadline for submissions on this consultation is 24 September 2010.
In June 2010 the Reserve Bank issued a consultation paper (PDF 43KB) proposing changes to its existing requirements on corporate governance for registered banks. These changes include a proposed new Banking Supervision Handbook document Corporate Governance (BS14) (PDF 84KB), and revisions to Handbook document BS1 (Statement of Principles: Bank Registration and Supervision) (PDF 323KB).
The deadline for comments on the proposals is 27 August 2010.
The Reserve Bank is proposing changes to the connected exposures and capital adequacy policies for registered banks in relation to the role of connected parties. Consultations were made in 2009 and, following feedback, changes are now proposed with effect from 30 September 2010. Read the summary of the proposed changes to the connected exposures and capital adequacy policies and feedback received as well as the features of the final policy. The changes would affect the following policy documents as well as banks’ conditions of registration (CoR):
- Statement of Principles: Bank Registration and Supervision BS1;
- Capital Adequacy Framework (Basel I Approach) BS2;
- Capital Adequacy Framework (Standardised Approach) BS2A;
- Capital Adequacy Framework (Internal Models Based Approach) BS2B; and
- Connected Exposures Policy BS8.
Recent changes to banking supervision policy
The Reserve Bank imposed new conditions of registration on most locally-incorporated banks requiring them to comply with its new liquidity policy from 1 April 2010. This completes the first stage of the implementation of the liquidity policy.
A letter of 7 October 2009 (PDF 37KB) summarises further stages that the Reserve Bank is planning to achieve full implementation of the policy. In particular, the Reserve Bank intends to increase the minimum one-year core funding ratio from its initial level of 65%, to 70% from 1 July 2011, and to 75% from 1 July 2012. The Reserve Bank will keep this plan under review in the light of funding market conditions and banks’ experience in complying with the initial requirement.
In addition, the Reserve Bank will shortly be proposing new conditions of registration for the remaining registered banks, including branches of overseas-incorporated banks, to implement the liquidity policy for them.
Basel II
Information on the implementation of the Basel II capital adequacy framework in New Zealand is available here.
Bank registration information
The purpose of this bank registration information document (PDF 106KB) is to provide information and guidance to potential applicants for bank registration. It covers the policies and processes the Reserve Bank applies to bank registration, and the relevant laws and regulations.
Outsourcing Requirements
Find out about the Reserve Bank’s outsourcing requirements for banks.
Other banking supervision topics
- Reserve Bank’s public submission to Basel Committee’s consultative proposals to strengthen the resilience of the banking sector (April 2010) (PDF 80KB)
- Review of Trans-Tasman regulation
- Review of financial products and providers including non-bank deposit-takers
- Relationships with other domestic and international banking and financial system regulators
- Use of the words “bank”, “banker”, “banking” and their derivatives
- Banking supervision articles, speeches, and other general information
- Banking supervision seminars and workshops
Related areas
For information on banks currently registered in New Zealand, including their credit ratings and links to their websites, see the New Zealand banks section of our website.
You will find information extracted from the Key Information Summaries disclosed by registered banks in our Banking system statistics section
The Financial Stability Report contains general information on current issues and recent developments the New Zealand banking system. Before 2004 these matters were reported on in each June issue of the Reserve Bank Bulletin.
Information about what the Bank would do in a crisis situation, can be found in our Crisis Management area.
If you have not found the information you seek, please try our Banking system frequently asked questions (FAQs)
