Rabo may lose NZ exemption

The Reserve Bank of New Zealand is proposing a tightening of some rules on corporate governance for locally incorporated banks following a review of the adequacy of these.

Among the key proposals is to discontinue the special exemptions granted to a bank which is fully, unconditionally and irrevocably guaranteed by an overseas parent bank with an AAA credit rating. Such a bank is not subject to the general requirement on separation from other interests of the owner, nor to the standard condition of registration concerning corporate governance.  

If finalised, this will affect Rabobank, which is the only locally incorporated bank that currently has such a special exemption.

The RBNZ is also planning to tighten norms for board members of a bank and now proposes that the majority of the members must be independent. This proposal stems from the RBNZ's concerns about systemic subsidiaries and the need for local directors to bring a fully independent perspective.

The RBNZ plans to finalise the new policy by the end of September and has invited submissions by August 27.