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Foreign-owned banks: Implications for New Zealand's financial stability

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Abstract
Of the five major banks in New Zealand three are owned by Australian parent companies, one operates as the New Zealand branch of an Australian bank, and one has a British parent. Thus, bank ownership in New Zealand is foreign, but not very diversified. The literature on foreign bank ownership predominately focuses on developing countries and highlights the fact that large, diversified banks can enhance stability. New Zealand differs from the developing countries previously studied, as it is a developed country with foreign, but not necessarily diversified ownership. This paper explores the composition of bank ownership in New Zealand and the implications for financial stability. The paper begins with an analysis of the diversification of parent companies' assets and discusses the implications of institutional arrangements between parents and their subsidiaries or financial stability. Next, the degree of interdependence between Australia and New Zealand is analysed. Finally, the paper presents stylised implications of the structure of the market on bank behaviour during a time of crisis. The interaction of these three factors dictates the implications of foreign bank ownership on financial stability in New Zealand.

Suggested Citation

  • Leslie Hull, 2002. "Foreign-owned banks: Implications for New Zealand's financial stability," Reserve Bank of New Zealand Discussion Paper Series DP2002/05, Reserve Bank of New Zealand.
    • Handle: RePEc:nzb:nzbdps:2002/05
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    References listed on IDEAS

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    Cited by:

    1. Hasnan Baber, 2020. "FinTech, Crowdfunding and Customer Retention in Islamic Banks," Vision, , vol. 24(3), pages 260-268, September.
    2. Quigley, Neil & Evans, Lewis, 2002. "An Analysis of the Reserve Bank of New Zealand's Policy on the Incorporation of Foreign Banks," Working Paper Series 3897, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    3. Kusi, Baah & Agbloyor, Elikplimi & Asongu, Simplice & Abor, Joshua, 2021. "Foreign Bank Assets and Presence on Banking Stability in Africa: Does Strong and Weak Corporate Governance Systems under different Regulatory Regimes Matter?," MPRA Paper 110136, University Library of Munich, Germany.
    4. Tim Ng, 2007. "La réglementation des activités bancaires transfrontalières : la politique de la Nouvelle-Zélande en matière d'externalisation dans les banques," Revue d'Économie Financière, Programme National Persée, vol. 90(4), pages 211-220.
    5. Geoff Bertram, 2002. "Factor income shares, the banking sector, the exchange rate, and the New Zealand current account deficit," New Zealand Economic Papers, Taylor & Francis Journals, vol. 36(2), pages 177-198.
    6. Leslie Hull, 2002. "Corporate behaviour and the balance of payments," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 65, December.
    7. Punnoose Jacob & Anella Munro, 2016. "A macroprudential stable funding requirement and monetary policy in a small open economy," Reserve Bank of New Zealand Discussion Paper Series DP2016/04, Reserve Bank of New Zealand.
    8. John Singleton & Grietjie Verhoef, 2010. "Regulation, deregulation, and internationalisation in South African and New Zealand banking," Business History, Taylor & Francis Journals, vol. 52(4), pages 536-563.
    9. Willy Chetwin, 2006. "The Reserve Bank's local-incorporation policy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 69, pages 1-10, December.
    10. Tim Ng, 2007. "The Reserve Bank’s policy on outsourcing by banks," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 70, June.
    11. George Kaufman, 2004. "Bank regulation and foreign-owned banks," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 67, june.
    12. Muhammad Mustafa Raziq & Martin Perry, 2012. "Foreign direct investment in New Zealand: Does it justify negative assessment?," Regional Science Policy & Practice, Wiley Blackwell, vol. 4(2), pages 155-164, June.
    13. Jacob, Punnoose & Munro, Anella, 2018. "A prudential stable funding requirement and monetary policy in a small open economy," Journal of Banking & Finance, Elsevier, vol. 94(C), pages 89-106.
    14. Susan Schroeder, 2009. "Defining and detecting financial fragility: New Zealand's experience," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 36(3), pages 287-307, February.

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    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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