Westpac is undertaking a review of its operating model in New Zealand as it searches for ways to conform to the conditions imposed on the bank following the shift away, in 2006, from trading wholly as a branch of the Australian bank.Two months ago Westpac disclosed that at the end of the March 2009 quarter it was operating in breach of its conditions of registration, including by holding total liabilities in its New Zealand branch in excess of the NZ$15 billion limit imposed by the Reserve Bank of New Zealand. This breach was a function of falling exchange rates and interest rates and the revaluation of derivative instruments.The quarterly general disclosure statement for Westpac's branch for the June 2009 quarter, published yesterday, shows these liabilities declined to NZ$13.1 billion.The issues for Westpac may run a little deeper.The quarterly disclosure statement for Westpac New Zealand Limited, also published yesterday, stated that RBNZ asked Westpac for a "review of the structure of its operating model to ensure that it is able to sustain durable compliance with the Reserve Bank of New Zealand's prudential policies."An independent review will take place, though which independent party is conducting this review was left out of the GDS.Since first opening its banking business in New Zealand in the late nineteenth century, Westpac operated as a branch.Policy reviews by the RBNZ earlier this decade, and which sought to make the local subsidiaries of Australian banks better placed to trade independently, obliged Westpac to establish an incorporated subsidiary to conduct most of its banking business. Westpac complied with this requirement, but only after negotiations to preserve aspects of its former operating model.