Academic journal article The Reserve Bank of New Zealand Bulletin

RBNZ Releases Finalised Outsourcing Policy for Banks

Academic journal article The Reserve Bank of New Zealand Bulletin

RBNZ Releases Finalised Outsourcing Policy for Banks

Article excerpt

18 January 2006

The Reserve Bank today published its finalised policy on the requirements which will apply to large New Zealand banks that have entered into outsourcing arrangements. The final policy follows consideration of comments on a draft policy issued in October 2005.

Reserve Bank Deputy Governor Adrian Orr said: "While outsourcing of banks' business functions is increasingly common and often a sensible business practice, it can expose banks and the financial system to new or increased risks that must be managed appropriately. Under the Reserve Bank's policy, outsourcing is permitted so long as it does not undermine a large bank's ability to continue to provide core liquidity, payment and transaction services both in good times and under stress."

"Failures of banks and of service providers to banks are low-probability events, but they can have a potentially high and immediate impact across the economy. The outsourcing policy provides safeguards to the stability of the New Zealand financial system against the possibility of such occurrences. …

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