The Reserve Bank’s local - incorporation policy

Release date
Vol. 69. No. 4. December 2006
Willy Chetwin
Foreign-owned banks play an important role in New Zealand’s financial system. This article discusses the Reserve Bank’s local-incorporation policy, which is one of the key elements in the policy framework to minimise the risks and maximise the benefits of hosting foreign-owned banks. The article identifies some of the benefits and risks of hosting foreign-owned banks; it discusses the local-incorporation policy rules and how the policy fits into the wider set of rules affecting banks; and discusses how the policy promotes the soundness and efficiency of New Zealand’s financial system, and avoids the damage to the financial system that could arise from the failure of a foreign-owned bank.