The Reserve Bank of New Zealand Act was amended in 2006 to include changes recommended by the Trans-Tasman Council on Banking Supervision (TTC). Equivalent legislation was passed in Australia around the same time.
The TTC, comprising representatives of the Australian and New Zealand Treasuries, the Reserve Banks of Australia and New Zealand and the Australian Prudential Regulation Authority (APRA) was formed in February 2005 as the next major step towards the development of a single trans-Tasman economic market in banking services. In August 2005 the TTC made recommendations to the Australian Treasurer and the New Zealand Minister of Finance on legislative changes that may be required to ensure APRA and the RBNZ support each other in the performance of their current regulatory responsibilities. These recommendations had the support of Governments in both countries and resulted in the Reserve Bank of New Zealand Amendment Act 2006 and an equivalent amendment act in Australia, the Financial Sector Legislation Amendment (Trans-Tasman Banking Supervision) Act 2006.
The New Zealand and Australian legislation together represent a path-breaking advance in home-host supervisory cooperation. The amendments require the Reserve Bank and APRA, when exercising their prudential regulation powers, to support each other in meeting their statutory responsibilities relating to prudential regulation and financial system stability and, where reasonably practicable, to avoid actions that are likely to have a detrimental effect on the financial system stability of the other country.
An action likely to have a detrimental effect on financial system stability is defined in the legislation to include an action that prevents or interferes with an outsourcing arrangement. Where the regulator has reasonable cause to believe that an action is likely to have a detrimental effect on financial system stability in the other country, it is required to consult with and consider the advice of the other regulator, if reasonably practicable to do so in the circumstances.
The legislation also imposes an obligation on a statutory manager or an administrator, where reasonably practicable to do so, to obtain the regulator's consent before taking an action that the statutory manager or administrator has reasonable cause to believe is likely to have a detrimental effect on financial system stability in the other country.
The trans-Tasman provisions in the Reserve Bank of New Zealand Amendment Act 2006 were brought into force on 15 December 2006. The Amendment Act also included some minor amendments to the principal Act. These amendments came into force on 1 November 2006. The NZ legislative changes are described in more detail in a December 2006 bulletin article: The Reserve Bank of New Zealand Amendment Act 2006 (PDF 64KB).
The Reserve Bank of New Zealand Act can be viewed electronically on the New Zealand Legislation website as can the Reserve Bank of New Zealand Amendment Act 2006 Commencement Order 2006 (SR 2006/372) and the Reserve Bank of New Zealand (Australian Financial Authorities) Regulations 2006 (SR 2006/373).
The Financial Sector Legislation Amendment (Trans-Tasman Banking Supervision) Act 2006 came into force on 6 December 2006. That legislation amended the following Australian legislation: the Australian Prudential Regulation Authority Act 1998, the Banking Act 1959 and the Financial Sector (Transfers of Business) Act 1999. The Australian legislation can be viewed on-line at: http://www.comlaw.gov.au/.