Westpac sees end to fight with Reserve Bank

By PAULA OLIVER

Westpac will meet the Reserve Bank in two weeks to discuss proposals to end a four-year tussle over its incorporation in New Zealand.

Chief executive Ann Sherry yesterday described Westpac's discussions with the central bank as "constant, robust and healthy".

Both parties hoped the issue could finally be sorted by the end of the financial year, she said.

Westpac has refused to submit to Reserve Bank requirements that it incorporate as a local business rather than operate as a branch of its Australian parent.

The Reserve Bank wants systemically important banks to be incorporated in New Zealand because it gives greater certainty about the location of assets and liabilities if trouble occurs and a statutory manager is needed.

Westpac is, however, in a unique position. It has its own Act of Parliament which protects New Zealand depositors - ranking them ahead of other unsecured creditors in the event of a collapse.

That overrides the often criticised Australian Banking Act, which puts Australian depositors at the front of the queue in the event of a collapse.

Other major banks in New Zealand are locally incorporated, but they took up that status decades ago.

If Westpac incorporated now, it would face tax costs that mount to hundreds of millions of dollars.

"Clearly we'd rather find a way of doing this other than paying $300 million or $400 million in capital gains tax in Australia," Sherry said.

"We've done some work that they asked us to do on our liabilities - just to give them full visibility of our business.

"So we're going back to talk to them to find out whether what we're proposing actually meets their requirements."