Reserve Bank seeks consultation on Open Bank Resolution

Monday 14th March 2011

The Reserve Bank has released a consultation paper on the pre-positioning requirements that banks will need to comply with to implement the Open Bank Resolution (OBR) policy.

Open Bank Resolution is a long-standing policy option aimed at resolving a bank failure quickly, in such as way that the bank can be kept open for business, thus minimising the stresses on the overall banking and payments system.

"The OBR policy provides for 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," said Deputy Reserve Bank Governor Grant Spencer.

"The global financial crisis highlighted the potentially enormous fiscal cost associated with supporting troubled banks. The Government therefore needs OBR to be an operational and effective policy option for containing the cost of a bank failure, while not threatening the safety of the overall financial system."

Banks are being consulted on the systems requirements that are needed to ensure the concept can be put into operation.

"The design of major Reserve Bank prudential policies such as outsourcing and local incorporation will help to facilitate the implementation of OBR. The pre-positioning of banks’ internal systems represents the next stage in that implementation process," Spencer said.

Submissions for the consultation paper close on June 30, 2011.

The consultation paper can be accessed on the Reserve Bank's website.

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