Banker shrugs off worries about Sydney move

By RICHARD BRADDELL

The Reserve Bank is pressing ahead with a plan to move the operation of a core banking settlement system to Australia in the middle of the year, despite criticism by the State Services Commission.

Reserve Bank deputy governor Rod Carr rejected the the commission's argument that shifting the real-time processing of large settlements between banks to Sydney could have an impact on New Zealand's sovereignty and the security of the banking system.

The commission said transaction processing in Sydney depended on telecommunications links with Australia.

Although these had been improved, they could never be as reliable as links between Wellington and Auckland.

The commission was also concerned that events in Australia out of New Zealand's control, such as labour market activity, could have an adverse impact here.

But in a letter to State Services Minister Trevor Mallard, Dr Carr downplayed the concerns, saying banking facilities such as deposits, cheques and credit cards would be unaffected by a telecommunications failure.

Dr Carr also told the Business Herald that since the Southern Cross submarine cable started operating, there was more long-distance telecommunications capacity between Australia and New Zealand than within New Zealand.

He said the move to Australia had two aspects, both of which involved the bank's existing relationship with the securities depository company Austraclear.

Under the arrangement, Austraclear is to take over the New Zealand securities depository and settlement business which the Reserve Bank now conducts, using Austraclear software.

The Reserve Bank got into the business in the early 90s only because there was a need which the private sector had been unable to fill.

In a second prong to the deal, Austraclear is handing to the Reserve Bank complete ownership of the real time gross settlement system, which is used for large wholesale settlements between 11 registered banks.

The system, which handles around 5000 transactions a day, will then be run under contract by Austraclear in Sydney.

The chief advantage was that the Reserve Bank would not have to pay several hundred thousand dollars for necessary hardware and software upgrades, Dr Carr said.