Reserve Bank may change rules on overseas banks

The Reserve Bank intends to seek regulatory changes that would require some overseas banks that do business here to establish locally incorporated subsidiaries instead of operating as branches.

It will affect banks that are "systemically" important to the banking system; banks with a significant level of retail deposits that came from countries with legislation giving home country depositors a preferential claim in a winding-up, such as in the United States and Australia; and banks with a significant level of retail deposits which, in their home countries, fail to publish the full information depositors need to assess financial soundness.

The changes would primarily affect Westpac and AMP banks, both of which operate as branches of their parent banks.

The Reserve Bank said the new policy was intended to help it manage a crisis affecting a systemically important bank. In a crisis, the central bank can appoint a statutory manager. However, in the case of a branch, distinguishing the New Zealand business from other parts of the operation could be difficult.

Draft regulations have been circulated for comment.

- NZPA