In December, the Reserve Bank released a consultation paper proposing a new policy for locally incorporated registered banks considering making significant acquisitions.

The paper proposes that banks should be required to obtain a notice of non-objection from the Reserve Bank before undertaking a significant acquisition, investment or business combination (a significant acquisition).

Each bank's board of directors will remain responsible for assessing the merits and risks associated with a significant acquisition. According to Deputy Governor Grant Spencer, "the proposed policy is intended to enable banks to assess any risks to the wider financial system arising from a significant acquisition, before that acquisition takes place".

The proposed policy change will help to align New Zealand practices with international standards and would support the objectives of the Reserve Bank to promote the maintenance of a sound and efficient financial system.

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

Click here to view the Consultation Document.