The Reserve Bank of New Zealand has softened its proposals to ban some outsourcing of activities by the four Australian-owned banks that dominate New Zealand's banking system and will give them more time to comply.The central bank, which also regulates New Zealand's banking system, proposed a wide-ranging set of rules about outsourcing last year. ANZ, Westpac, Commonwealth Bank of Australia's ASB and National Australia Bank's BNZ all pushed back against the changes, which they said could cost up to NZ$400 million and restrict their ability to find efficiencies and innovate.Last year's review was 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 Reserve Bank released its revised proposals on Monday, including watering down plans to prohibit the outsourcing of some critical functions and keeping the existing NZ$10 billion threshold for the outsourcing policy. The central bank had considering lowering the threshold to include banks with assets of NZ$1 billion to NZ$10 billion.The Reserve Bank said its revised proposal would be an 'outcomes' based policy where critical functions were allowed to be outsourced, as long as the banks could show they had alternatives."Instead of prohibiting activities from being outsourced to a parent or related party, the policy would instead require banks that outsource certain key functions have robust backup for capabilities in place," the bank said in its 29-page proposal paper. The bank also extended the transition period from two and a half years to five years. Submissions on the revised proposals close on August 12. The New Zealand Bankers Association welcomed the revised proposals.[Source:  http://rbnz.govt.nz/-/media/ReserveBank/Files/regulation-and-supervision/banks/consultations/Final-consultation-outsourcing-policy-for-registered-banks-May2016.pdf?la=en ]