Academic journal article The Reserve Bank of New Zealand Bulletin

Need for Effective Local Supervision of Banks: 2 October 2004

Academic journal article The Reserve Bank of New Zealand Bulletin

Need for Effective Local Supervision of Banks: 2 October 2004

Article excerpt

The Reserve Bank is emphasising the continuing need for countries with predominantly foreign-owned banks to have the capacity to maintain the stability of their financial systems and to respond to a banking crisis.

Speaking at a US Federal Reserve conference in Chicago on bank insolvency, Reserve Bank Governor Alan Bollard outlined the particular challenges increasingly facing countries with banking systems dominated by foreign banks. He also discussed the ways foreign and domestic regulatory authorities can better cooperate and coordinate their actions, including in the case of Australia and New Zealand.

Dr Bollard said that responding to a banking crisis was "a challenge for any supervisor, but it is all the more complicated when it is a foreign-owned bank that gets into difficulty, given different jurisdictions, potentially different statutory objectives between home and host (supervisory) authorities, and a greater degree of jurisdictional separation between taxpayers and depositors than is the case with domestically-owned banks.

"In the absence of any fair and formalised, operationally and legally robust, trans-national regulatory framework, the financial stability buck stops at national laws and the supervisor's and central bank's duties under those laws. …

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