25 July 2003
RBNZ focusing on banking supervision in NZ
The Reserve Bank is signalling its intention to put more effort into its role as supervisor of banks in New Zealand, given the increasing integration of the New Zealand and Australian financial systems facilitated by technology.
Speaking to a paper presented to the Finance Sector Ombudsman Conference in Wellington, Dr Bollard said "The Reserve Bank is keen to ensure that our regulatory system (for banks) is invigorated and focused."
Dr Bollard described the policy areas that the Reserve Bank was now focusing on as including "an assessment of the quantity and quality of capital for New Zealand banks that would be appropriate given their risk profiles."
"We are implementing our local incorporation policy, under which systemically important banks will be required to be incorporated in New Zealand ... Currently, only one systemically important bank in New Zealand is not locally incorporated, and we are working with that bank to deal with the issue appropriately."
Dr Bollard said the Reserve Bank was also working on ways to rapidly get a failed bank operating again, saying one option was "recapitalising a failed bank using creditors' funds." He said the New Zealand financial system was very healthy, but increasing integration with the Australian financial system meant the Reserve Bank always needed to be alert for signs of financial stress both here and across the Tasman. Dr Bollard said this required the Reserve Bank to "evaluate the core bank functions necessary for a statutory manager to be able to operate the bank on a stand-alone basis in a distress situation, and how ... a New Zealand statutory manager will have jurisdictional reach over those functions."
Dr Bollard said the Reserve Bank was watching carefully the proposed sale of the National Bank. "We would expect there to be no material transfers of National Bank business into a branch form (of an overseas incorporated bank), and we would expect further discussions before any movement of technical capacity that reduced the (National) bank's ability to continue to operate on a stand-alone basis under New Zealand statutory management. We would also be looking at the adequacy of current risk-management requirements for systemically important banks in the context of any further aggregation of country risk."
For further information contact
Head of Corporate Affairs
Ph 04 471 3671, 021 497 418, Jackmanp@rbnz.govt.nz