Outsourcing policy for banks
This page provides information on our outsourcing policy for large New-Zealand incorporated registered banks. We define large banks as those with liabilities, net of amounts owed to related parties, of $10 billion or more.
What is outsourcing
Outsourcing occurs when a bank uses another party to perform business functions that would traditionally have been undertaken by the bank itself. Common examples of outsourced activities include IT processing, accounting and call centres.
The aim of the policy
Our outsourcing policy requires large banks to have the legal and practical ability to control and execute outsourced functions. It aims to ensure any outsourcing arrangement entered into by the bank does not compromise its ability to:
- be effectively:
- administered under statutory management
- operated for the purposes of continuing to provide and circulate liquidity to the financial system and the wider economy
- facilitate the carrying on of basic banking services by any new owner of all or part of the bank
- address the impact that the failure of a service or a function provider may have on the bank's ability to carry on all or part of its business.
This is to ensure the impact of the failure of a large bank, or a service provider to a large bank, on the wider economy is minimised and to preserve options for the resolution of large bank failures.
Condition of registration relating to outsourcing
Large banks are generally subject to a standard condition of registration relating to outsourcing. This condition requires that, in relation to outsourcing arrangements, the bank can meet all of the following outcomes:
- continue to meet its daily clearing, settlement and other time-critical obligations, both before the start of the first business day after the day of failure and thereafter
- monitor and manage its financial positions including credit, liquidity and market risk positions, both on the start of the first business day after the day of failure and thereafter
- make available the systems and financial data necessary for the statutory manager and the Reserve Bank to have available a range of options for managing the failed bank, both before the start of the business day after the day of failure and thereafter
- provide basic banking services to existing customers including, but not limited to, liquidity (both access to deposits and to credit lines as defined in basic banking services) and account activity reporting, both on the start of the first business day after the day of failure and thereafter.
Current policy and supporting documents
Our current policy on outsourcing (BS11) issued in September 2022 is available on the Banking prudential requirements page.
Supporting documents to the outsourcing policy are also available on the Banking Supervision Handbook page. These include:
- Exempt list
- List of pre-approved functions and services
- Application form A for BS11 — Exempt list
- Application form B for BS11 — List of pre-approved functions and services
- Application form C for BS11 — Relationship with subsidiary
- Application form D for BS11 — Outsourcing arrangement made with or through an other related party
- Application form E for BS11 — Temporary suspensions
- Guidance for preparing a separation plan.
2006 outsourcing policy
Some outsourcing arrangements by large banks may still be captured by the January 2006 version of the outsourcing policy. This policy has similar objectives and requirements to the current (September 2022) version of the policy.
How the current policy was developed
We published a feedback statement for the consultation on the exposure draft for the revised outsourcing policy (BS11). We then published the final revised outsourcing policy for locally incorporated registered banks as a new Banking Supervision Handbook document – Outsourcing policy (BS11).
Download the 2017 Outsourcing policy (BS11) (PDF 252 KB)
Following the release of final policy decisions in February 2017, we published an exposure draft for public consultation before finalising the wording of the final policy.
Consultation paper: Exposure draft for BS11: the Outsourcing Policy for Registered Banks (PDF 83KB)
Exposure draft for consultation (PDF 164KB)
Pre-approved functions and services for the purposes of BS11 (PDF 58KB)
White list for the purposes of BS11: Outsourcing policy for registered banks (PDF 58KB)
We published our final policy decisions, summary of submission feedback on 2015/2016 consultations, and regulatory impact statement.
We published a second consultation document changing some of the policy proposals in the 2015 consultation paper including:
- requiring banks to have a robust back-up arrangement on key functions they want to outsource
- retaining the existing threshold for the outsourcing policy;
- a definition of basic banking services; and
- extending the transitional path to compliance to 5 years.
We consulted on potential changes arising out of the review of the outsourcing policy for registered banks. The consultation proposed retaining the policy's objectives and supported banks' continued use of outsourcing arrangements. It also proposed updating the objectives to better align with Open Bank Resolution and provide more clarity on the policy