The Reserve Bank of New Zealand (Reserve Bank) has extended and renamed the Reserve Bank of New Zealand Act (Overseas Banks) Class Authorisation Notice 2019 that was due to expire on 22 September 2024.
This Class Authorisation has been extended to 31 December 2026 and renamed the Banking (Prudential Supervision) Act (Overseas Banks) Class Authorisation Notice 2019 (Class Authorisation).
The Banking (Prudential Supervision) Act (Overseas Banks) Class Authorisation Amendment Notice 2024 (Class Authorisation Amendment Notice) published in the New Zealand Gazette is available here.
Who should read this? Why?
Any overseas bank that relies on the Class Authorisation to ensure they are aware of these changes.
What does it cover?
The Class Authorisation was originally issued by the Reserve Bank in 2019, after consultation, to provide a safe harbour for overseas banks that do not have a place of business in New Zealand but conduct business with New Zealand-based wholesale clients (primarily large corporates, institutions and government agencies), from the restriction in s 64 of Banking (Prudential Supervision) Act 1989 (BPSA). The Class Authorisation was due to expire on 22 September 2024.
As background, s 64 prohibits any person, other than the Reserve Bank, a New Zealand registered bank or a person authorised by the Reserve Bank under BPSA, from being formed, incorporated, or registered using or changing its name to a name or title that includes the words “bank”, banker” or “banking” or their equivalents in other languages (referred to as a “restricted word”), or carrying on any activity directly or indirectly in New Zealand (whether through an agent or otherwise) using a name or title that includes a restricted word. (There is an exclusion from the restriction where the restricted word signifies a geographic place name or the name of a natural person; and the name or title is not used in respect of a financial institution, or could not reasonably be mistaken for the name or title of a financial institution.)
To rely on the Class Authorisation, the overseas bank must meet certain conditions, including only carrying on in New Zealand the wholesale banking activities specified in the Class Authorisation, and providing regular reporting to the Reserve Bank.
The Class Authorisation Amendment Notice amends the Class Authorisation and was published in the New Zealand Gazette on 16 August 2024. Pursuant to the Class Authorisation Amendment Notice:
- The revocation date has been extended to 31 December 2026 for all of the class authorisations specified in the Class Authorisation.
- The title of the Class Authorisation has been changed from the ‘Reserve Bank of New Zealand Act (Overseas Banks) Class Authorisation Notice 2019’ to the ‘Banking (Prudential Supervision) Act 1989 (Overseas Banks) Class Authorisation Notice 2019’, and references to the Act in the Class Authorisation have been updated. These changes are to reflect the name change of the BPSA in July 2022.
Our view
We are pleased the Reserve Bank has extended the date of the Class Authorisation, providing greater certainty to the overseas banks that rely on the Class Authorisation for the next two years, although those banks relying on it would no doubt have appreciated more than one month’s notice.
By late 2026, the Reserve Bank will hopefully have a more settled view on when the relevant provisions of the new Deposit Takers Act 2023 (DTA) will replace s64 of BPSA, and the terms of any new class authorisation under the DTA.
What next?
Overseas banks that rely on the Class Authorisation will need to continue to actively monitor the position to ensure they do not miss any updates from the Reserve Bank on the Class Authorisation or any new class authorisation under the DTA.
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