Consultation overview
Branches of overseas banks can be an important link between our economy and global financial markets. Our policy for branches has developed over time and has resulted in inconsistent outcomes for branches, which may have been difficult to interpret and increased regulatory burden.
As a result, we reviewed the policy for branches of overseas banks to address these matters. The objective of the review was to create a simple, coherent and transparent policy framework for branches that protects and promotes financial stability.
Three consultation papers were published to seek feedback on our proposals. We thank the industry and other stakeholders for their feedback and engagement with the review process.
You can read the proposals, submissions received, and our summary of submissions below.
The final decisions from the review will be reflected through the DTA standards development process. The Branch Standard is open for consultation from 21 August – 22 November, as a chapter of the non-core standards consultation paper.
Provide your feedback on the Branch Standard, a chapter of the non-core standards consultation paper.
Final decisions in the review
Our new policy about branches is:
- all branches in New Zealand will be restricted to engaging in wholesale business (that is, with corporates, institutions and other wholesale investors), meaning they could not take retail deposits or offer products or services to retail customers
- the maximum size of a branch is limited to NZ$15 billion in total assets, and
- dual registration of branches is permitted, provided:
- the relevant subsidiary and branch are sufficiently separate, and any identified risks are mitigated by specific conditions; and
- dual-registered branches only conduct business with large wholesale customers –the exact definition of large wholesale customers is subject to further consultation in the non-core standards consultation paper.
Our intention in announcing the decisions in November 2023 was to give registered branches the clarity to implement these decisions ahead of the Deposit Takers Act Standards commencing. We expect this to happen in 2028. It is a longer implementation timeline than we consulted on in 2022, having reflected feedback from stakeholders about the complexity of implementing these decisions.
We published a Regulatory Impact Statement (RIS) that outlines our options analysis and evaluation of the costs and benefits of the branch review key decisions.
Key proposals outlined in the third consultation paper
In November 2023, we published a third consultation paper on implementation considerations. The consultation paper proposed that:
- we define a large wholesale customer as such if it has either consolidated annual turnover of over NZ$50 million, or net assets of over NZ$50 million.
- we will implement the outcomes of the branch review through either a standard or conditions of licence issued under the Deposit Takers Act 2023 (DTA).
The summary of submissions to the third consultation paper, as well as the full submissions, can be found below. We published these on 21 August 2024, alongside the DTA non-core standards consultation paper.
Key proposals outlined in the second consultation paper
- That all branches in New Zealand be restricted to engaging in wholesale business (that is, with corporates, institutions, and other wholesale investors), meaning they could not take retail deposits or offer products or services to retail customers.
- To limit the maximum size of a branch to NZ$15 billion in total assets.
- That we continue to allow the dual registration of branches, provided:
- the relevant subsidiary and branch are sufficiently separate, and any identified risks are mitigated by specific conditions of registration, and
- dual-registered branches only conduct business with large wholesale customers — those with consolidated turnover greater than NZ$50 million.
A three-month consultation period started on 24 August 2022 and closed on 16 November 2022.
Information from the first round of consultation
The first consultation paper, published in October 2021, set out the objectives, problem definition, assessment principles, and some high-level policy options and questions.
The first consultation closed in March 2022. We thank industry and other stakeholders for their feedback on the first consultation and engagement with the review process to date. Alongside the second consultation paper, we have also published a summary of submissions in response to the first consultation paper.