Page 24 - English-DBINZ brochure-2019

21 Doing business in New Zealand

The Reserve Bank prefers that financial institutions incorporate a local subsidiary in New Zealand.
However, a financial institution is only obliged to do so if it is systematically important (ie if its New
Zealand liabilities, not owed to related parties, exceed NZ$15b) or if it has more than NZ$200m of retail
deposits in New Zealand and it operates in a country that gives priority to local depositors (eg Australia).
Setting up a branch in New Zealand, rather than a local subsidiary, will have the advantage of having
fewer Reserve Bank policies apply (eg governance, connected party exposure and open bank resolution).
In some limited circumstances, foreign-owned banks may be permitted to operate as both a branch
and a New Zealand-incorporated subsidiary (‘dual registration’). If a bank is permitted to have dual
registration, there are a number of conditions that could be imposed, including that the branch operation
is restricted from taking retail deposits.
To apply to be a registered bank, the applicant’s business must consist of borrowing and lending money
or the provision of financial services and the applicant must provide material relevant to the following
criteria:

ə Incorporation and ownership structure of the applicant, including the name of the proposed bank,
method of incorporation, ownership of the proposed bank, structure charts of the proposed bank’s
group and, if the proposed bank is to incorporate a local subsidiary, proposed composition of the
board, the source of initial capital and the constitution of the proposed bank
ə Size of the proposed business, including a description of the services the proposed bank intends to
provide and of the market sectors it plans to target and forecasts for the first three years of operation
as a registered bank
ə Ability of the applicant to carry out its business in a prudent manner, including an outline of the
prudential and AML/CFT policies to be employed by the proposed bank, the nature and extent of audit
arrangements, the accounting systems and internal controls and, where relevant, the arrangements
for supervision of the New Zealand operations by the parent bank or head office and a description of
the proposed risk management systems and policies, details relating to any functions or business to
be outsourced and the capital structure of the proposed bank
ə Standing of the applicant and its owner in the financial markets, including an outline of the parent
company’s main activities and areas of expertise, a list of the major shareholders of the parent
company, the financial accounts for the parent company for the last three years and an outline of the
extent and type of support that the parent company will be providing to the applicant
ə Suitability of the current management of the applicant, including the résumés of the existing or
proposed directors and executives, a copy of their criminal record and written consent for the Reserve
Bank to make enquiries with any relevant authority.

“Registered banks must also publish quarterly disclosure
statements and the credit rating of the registered bank.”

Applications from overseas entities may also be required to provide information on the regulatory
requirements relating to banking in the home jurisdiction of the applicant and the nature and extent of
financial and other information disclosed to the public by the applicant or its parent company.

The Reserve Bank primarily imposes its policies (which are set out in the Reserve Bank’s Banking
Supervision Handbook and can be found on the Reserve Bank’s website) through the conditions of
registration of each registered bank. The Reserve Bank can impose or vary conditions of registration
on seven days’ notice. The Reserve Bank’s standard conditions of registration are set out in appendix
one of BS1 in the Reserve Bank’s Banking Supervision Handbook and include minimum capital adequacy
and liquidity requirements, limits on related party exposure and conducting non-financial activities