Open Bank Resolution

[MrMonkey]

Any more word on this venture by the RBNZ?

Does anyone know what banks would be included in this when implemented?

[peat]

all locally incorporated banks with over $1 billion dollars of retail deposits should be required to participate in the scheme.

http://www.rbnz.govt.nz/finstab/banking/4368385.html

In March 2011, the Reserve Bank issued a consultation paper on the pre-positioning requirements that banks will be expected to comply with to fully implement the Open Bank Resolution (OBR) policy. The OBR policy would allow a distressed bank to be kept open for business, providing continuity of core banking services to retail customers and businesses, while placing the cost of a bank failure primarily on the bank’s shareholders and creditors rather than the taxpayer. The consultation closed on 30 September 2011.
The next stage of the process is for banks to provide detailed implementation plans setting out how they meet the required outputs of the pre-positioning. The deadline for submitting plans is the end of February 2012.

[MrMonkey]

How do you feel about it?




all locally incorporated banks with over $1 billion dollars of retail deposits should be required to participate in the scheme.

http://www.rbnz.govt.nz/finstab/banking/4368385.html

In March 2011, the Reserve Bank issued a consultation paper on the pre-positioning requirements that banks will be expected to comply with to fully implement the Open Bank Resolution (OBR) policy. The OBR policy would allow a distressed bank to be kept open for business, providing continuity of core banking services to retail customers and businesses, while placing the cost of a bank failure primarily on the bank’s shareholders and creditors rather than the taxpayer. The consultation closed on 30 September 2011.
The next stage of the process is for banks to provide detailed implementation plans setting out how they meet the required outputs of the pre-positioning. The deadline for submitting plans is the end of February 2012.

[peat]

I think its appropriate for the shareholders and creditors to take the actual hit and for the depositors to retain their funds as much as is possible , even though they may sacrifice some short term liquidity.
Whether it would work as intended in a crisis is of course unknown. but it seems like a progressive innovative strategy to me.

[MrMonkey]

Its all sound and good but should we be wary that such could take place to say term deposits we hold with banks etc?

[Fred114]

Did the RBNZ receive their plans today?

[peat]

website is silent

[Lizard]

Must have missed this earlier.

I would think the risk would be around contagion to other (non-guaranteed) banks and a bit of mattress-stuffing. Also would be unsure how well they could keep it a secret once the RB started an initial assessment - therefore also precipitating a run on the bank in question, given the consequences.


The Reserve Bank will undertake an initial assessment of the health of a troubled bank. Following this initial assessment it may make a recommendation to the Minister of Finance that the bank be placed under statutory management.

Unclear on first reading whether new deposits are accepted at the re-opened bank and whether they would also be guaranteed... in which case, clear the accounts at the rest of them and stick funds in the coffers of the first one guaranteed?