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.

Recent changes to banking supervision policy

In October 2009, the Reserve Bank released an updated version of its liquidity policy for banks Liquidity Policy (BS13) (PDF 189KB) and Liquid Assets Annex (BS13A) (PDF 127KB). Compared to the version issued on 30 June 2009, the updated policy reflects changes in the calibration of the minimum ratio requirements, in the light of feedback from banks on the expected impact of those requirements.

The Reserve Bank has now imposed new conditions of registration on most locally-incorporated banks requiring them to comply with the policy from 1 April 2010. A Regulatory Impact Assessment (PDF 203KB) of the new liquidity requirements sets out the objectives of the policy and the alternative options considered for achieving them, and assesses the relative costs and benefits of those options.

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.

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)