RBNZ revises outsourcing policy for large banks

Grant Spencer 

The Reserve Bank today published a revised outsourcing policy for large banks.

The revised policy aims to ensure that a bank can continue to operate in a situation where a key service provider fails.

The revision of the outsourcing policy follows a review by the Reserve Bank, which concluded that greater clarity of the policy and more consistency of application by banks would be desirable to ensure that they can continue to provide required services in times of stress.

The revised policy sets requirements that banks need to meet when outsourcing particular functions and services, especially if the service provider is a related party of the bank.

An ongoing ability by banks to provide liquidity and basic services to customers, even in times of stress, is an important part of maintaining a sound and efficient financial system.

Resolution Options

Under the revised policy, banks are required to ensure that a range of resolution options, including open bank resolution, are available in the unlikely event of a bank failure. This supports financial stability in times of stress.

It applies to locally-incorporated registered banks with net liabilities of more than $10 billion, and comes into force on 1 October 2017. Affected banks will have five years to come into compliance with the revised policy, which replaces an earlier policy introduced in 2006.

Constructive involvement

We acknowledge the constructive involvement of the banking industry and other interested parties who were actively engaged during the development of the revised policy.

Our engagement with the banking industry and others has been instrumental in helping to minimise costs to the banking industry while still ensuring that the key objectives of the revised policy are clearly understood and achievable.

Reserve Bank of New Zealand would work with banks to ensure a practical path to compliance with the policy within the five-year deadline.

Grant Spencer is Deputy Governor of Reserve Bank of New Zealand.

For more information, please visit www.rbnz.govt.nz to read the following:

  1. Revised Outsourcing Policy
  2. Responses and feedback from consultation on outsourcing policy
  3. Description of outsourcing requirements

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