Open Bank Resolution Impact Assessment Released

Article excerpt

1 November 2012

The Reserve Bank has today released a Regulatory Impact Assessment of pre-positioning for the Open Bank Resolution (OBR) policy.

OBR is a long-standing Reserve Bank policy aimed at allowing a distressed bank to be kept open for business, while placing the cost of a bank failure primarily on the bank's shareholders and creditors, rather than the taxpayer.

The release of the Regulatory Impact Assessment follows an earlier consultation with banks on internal system changes required for OBR pre-positioning.

The Reserve Bank is also releasing a summary of submissions (PDF 137KB) received on the pre-positioning for OBR and a document that maps the OBR policy against the principles for effective resolution of a distressed bank, as set out by international agency the Financial Stability Board.

Reserve Bank Deputy Governor Grant Spencer said: "Bank failures in New Zealand are rare and the financial system remains sound. The OBR policy will offer government a very real alternative to bailout in the event of a bank failure in New Zealand. The availability of OBR as an option is expected to reduce moral hazard, strengthening incentives for banks to operate prudently and to seek private sector solutions during a crisis," he said. …