New policy proposed for significant acquisitions by banks

New policy proposed for significant acquisitions by banks

The Reserve Bank has today released a consultation paper proposing a new policy for locally incorporated registered banks considering making significant acquisitions, investments or business mergers (http://www.rbnz.govt.nz/finstab/banking/regulation/4242534.pdf).

The consultation paper proposes that banks should be required to obtain a notice of non-objection from the Reserve Bank before undertaking such transactions.

Deputy Governor Grant Spencer said a bank’s board of directors is responsible for assessing the merits and risks of any significant acquisition.

“However, the proposed policy is intended to enable the Bank to assess any risks to the wider financial system arising from a significant acquisition before that acquisition takes place,” he said.

Under the proposal, a new Banking Supervision Handbook document entitled Significant Acquisitions Policy (BS15) will be issued. This will provide the detail of the policy, including specifying what constitutes a significant acquisition and the information that would be required from banks.

The change will help to better align practices with international standards and is timely after the Global Financial Crisis.

Responses to the consultation paper should be submitted to the Reserve Bank by 31 January 2011. The paper can be accessed on the Bank’s website (http://www.rbnz.govt.nz/finstab/banking/).

ENDS

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