Reserve Bank consults on policy for branches of overseas banks

The Reserve Bank is seeking feedback on the review of its policy for branches of overseas banks.

Now on its second and final consultation, the review aims to create a simple, coherent, and transparent policy framework for branches that protects and promotes financial stability. The first consultation was published in October 2021.

Read more: Reserve Bank announces policy review for overseas banks

Christian Hawkesby, RBNZ deputy governor and general manager for financial stability, said the central bank’s regulated entities, including branches of overseas banks, need to be sound, innovative, and have a constructive working relationship with RBNZ to maintain a healthy and vibrant financial system. This, in turn, is fundamental to the overall resilience of the New Zealand economy.

Key proposals outlined in the paper include:

• restricting all branches in New Zealand from engaging in wholesale business, meaning they could not take retail deposits or offer products or services to retail customers 
• limiting the maximum size of a branch to $15 billion in total assets 
• continuing 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
  • dual-registered branches only conduct business with large wholesale customers – those with consolidated turnover greater than $50 million

The final decisions on the review are expected to be out in early 2023 after submissions on the second consultation have been considered. RBNZ is proposing a three-year transition period for full implementation.

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Submissions on the policy questions set out in the bank’s branch policy consultation, and any alternative options or proposals, will be accepted until Nov. 15.

RBNZ will also be hosting a webinar on Aug. 31. Interested parties are welcome to attend. Email [email protected] to register interest.