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The Reserve Bank’s policy on outsourcing by banks

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  • Tim Ng

    (Reserve Bank of New Zealand)

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Abstract

This article explains the Reserve Bank of New Zealand’s policy on outsourcing by banks. Banks in New Zealand typically outsource a range of business activities, both to independent and to related-party service providers, and both domestically and offshore. The predominance in our banking system of banks owned by offshore parent banks, who provide important services to their subsidiaries, means that cross-border, related-party outsourcing is of particular relevance. The outsourcing policy requires a large bank’s board to maintain legal and practical control over any outsourced functions such that the bank is able to continue to play its key role of supporting financial activity in the economy, both under normal circumstances and (particularly) under stress. The Reserve Bank applies the policy with some flexibility to suit the circumstances of individual banks. The policy thus ensures that the banking system retains the ability to avert distress, and underpins the Reserve Bank’s ability to manage a financial crisis, while enabling the financial system to enjoy the benefits of foreign bank participation.

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Bibliographic Info

Article provided by Reserve Bank of New Zealand in its journal Reserve Bank of New Zealand Bulletin.

Volume (Year): 70 (2007)
Issue (Month): (June)
Pages:

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Handle: RePEc:nzb:nzbbul:june2007:4

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  1. Edward J. Kane, 2005. "Confronting Divergent Interests in Cross-Country Regulatory Arrangements," NBER Working Papers 11865, National Bureau of Economic Research, Inc.
  2. Alan Bollard, 2005. "Bank regulation and supervision in New Zealand: recent and ongoing developments," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 68, June.
  3. Leslie Hull, 2002. "Foreign-owned banks: Implications for New Zealand's financial stability," Reserve Bank of New Zealand Discussion Paper Series DP2002/05, Reserve Bank of New Zealand.
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