17 September 1999
Changes to banking registration rules proposed
The Reserve Bank today indicated that the rules under which banks can operate in New Zealand may soon change.
At the moment, banks can be either locally incorporated or branches of an offshore parent. The proposed change would require some overseas-owned banks that operate here as branches to become locally incorporated subsidiaries. This would have no day-to-day effect on bank customers.
If what's proposed goes ahead, banks affected would be those that:
- have New Zealand activities large enough that their soundness is important for the New Zealand financial system as a whole; or
- have a significant level of retail deposits in New Zealand and are branches of banks incorporated in other countries which either allow banks to operate with low levels of public financial disclosure or give priority to depositors in that country in the event of a crisis.
Reserve Bank Deputy Governor Rod Carr said: "A locally incorporated bank, even if foreign owned, is a stand-alone legal entity, unlike a branch. As a result, creditors have claims on a clear-cut legal entity and list of assets. With a branch, these demarcation lines are not so well defined.
"For all banks it is becoming increasingly difficult to define a New Zealand asset or determine the country within which an asset is held. Local incorporation makes managing this problem easier in the event of a crisis.
"As well, the law in some countries means that if a bank registered in that country fails, depositors there are treated better than creditors (including depositors) from other countries such as New Zealand.
"Incorporation in New Zealand means asset ownership is formalised and disclosure statements are more consistent. As well, New Zealand assets cannot be subject to offshore claims that could take priority.
"Banks likely to be affected are being consulted. Final decisions have not been made," Dr Carr concluded.
For further information contact
Paul Jackman
Corporate Affairs Manager
Phone 04 471 3671, home 04 938 8177, pager 026 105 085,
E mail Jackmanp@rbnz.govt.nz
