Authorisations for the use of restricted words by overseas banks

Status: The Reserve Bank has published a consultation paper seeking feedback on its current approach to allowing overseas banks to use restricted words in New Zealand without being registered here as a bank (restricted words include “bank’ and its derivatives such as “banker” and “banking”).

Consultation period: First half of 2018

11 April 2018

The Reserve Bank has had a practice of providing non-objection letters to small numbers of overseas banks that are not registered as banks in New Zealand. These letters allow them to carry on limited activities in New Zealand using names or titles that include restricted words under the Reserve Bank of New Zealand Act 1989 (the ‘Act’). Restricted words include “bank’ and its derivatives such as “banker” and “banking”. The Reserve Bank intends to move away from the use of non-objection letters, and instead use authorisations issued under section 65(1) of Act. At the same time, the Reserve Bank is reconsidering the criteria it will apply when considering applications from overseas banks to carry on activities in New Zealand using a name or title that includes a restricted word.

The Reserve Bank has published a consultation document on its proposals. These include publishing a register of authorised banks on the Reserve Bank’s website, and generally preventing overseas banks authorised under section 65(1) from carrying on retail activities in New Zealand. There are two guidance notes included in the consultation document. The first explains the Reserve Bank’s interpretation of when an overseas bank will be “carrying on an activity in New Zealand” and therefore require a section 65(1) authorisation to use restricted words in New Zealand without registering as a bank here. The second explains the Reserve Bank’s approach to considering applications for section 65(1) authorisations.

The move to formally rely on section 65(1) authorisations, and publication of guidance, is intended to provide a more rigorous and transparent process for determining when an overseas bank may use restricted words in New Zealand without registering as a bank here. The Reserve Bank is not intending to increase the scope for overseas banks to carry on activities in New Zealand without being registered. The Reserve Bank’s default position continues to be that any overseas bank intending to carry on activity in New Zealand should register. Authorisations will be provided on an exceptional basis, and only where the planned activity and presence of the overseas bank is sufficiently limited.