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An Analysis of the Reserve Bank of New Zealand's Policy on the Incorporation of Foreign Banks

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  • Quigley, Neil
  • Evans, Lewis

Abstract

In this study we analyse the objectives underlying the Reserve Bank's policy ofmandatory local incorporation and provide an assessment of the effectiveness of the policy in meeting these objectives. We review both the legal and regulatory framework within which branches of foreign banks now operate in New Zealand and we review the international literature on the costs benefits and efficiency tradeoffs associated with a policy of mandatory local incorporation. We consider the consistency of mandatory local incorporation with the Reserve Bank's current approach to the regulation of financial institutions and we show that the governance structure that is imposed on New Zealand banks by mandatory local incorporation is likely to reduce the efficiency of their operations. Finally we examine a number of approaches that may meet the current concerns of the RBNZ at lower cost than a policy of mandatory local incorporation.

Suggested Citation

  • Quigley, Neil & Evans, Lewis, 2002. "An Analysis of the Reserve Bank of New Zealand's Policy on the Incorporation of Foreign Banks," Working Paper Series 18995, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    • Handle: RePEc:vuw:vuwcsr:18995
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    File URL: https://ir.wgtn.ac.nz/handle/123456789/18995
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    References listed on IDEAS

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    1. Dr Don Brash, 2000. "Central banks and financial system stability in an uncertain world," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 63, June.
    2. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    3. John Tait, 1992. "Payment systems in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 55, march.
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