RBNZ revising outsourcing policy for banks

The Reserve Bank of New Zealand has announced proposals for a new outsourcing policy for banks that it said would allow banks to pursue efficiency gains by outsourcing operations offshore, but also allow the New Zealand arm of an Australasian to operate in a stand-alone way if it was separated from its parent.

The review is the first since a controversial series of moves from 2004 to 2006 that forced ANZ to move more of its New Zealand back office activities back to New Zealand from Australia and forced Westpac New Zealand to abandon a plan to outsource its systems to Australia.

The central bank, which also regulates banks and insurers in New Zealand, said the current outsourcing requirements had been in place since 2006 and it was time for a review after nine years of change in the regulatory landscape.

The proposals included in a consultation paper were for an explicit requirement for a separation plan for subsidiaries of foreign-owned banks, a list of functions that could not be outsourced, and a clearer process to allow outsourcing.
 
"The Reserve Bank appreciates that outsourcing can produce efficiency benefits for banks and that it allows banks to access state-of-the-art technology and practices that are not necessarily available internally or within New Zealand," the bank said.

"The proposed new policy does not prevent banks from realising those benefits. The policy also does not prohibit the use of outsourcing arrangements," it said.
 
The consultation closes on November 4.