New Zealand banks now compliant with outsourcing policy

WELLINGTON, NEW ZEALAND — After six years of significant work and costs, New Zealand’s major banks have achieved full compliance with the Reserve Bank’s revised outsourcing policy known as BS11.
The policy, first introduced in 2006 and formally announced by the Reserve Bank of New Zealand in 2017, aims to ensure banks can continue critical operations and protect financial stability even if they need to separate from parent companies or if service providers fail.
“This policy gives us a protection that was not there properly before and has now gone live. It has been a long journey to get there,” said Reserve Bank Director of Prudential Supervision Scott McKinnon.
Achieving compliance involved thousands of bank staff, over 1500 meetings with regulators, and hundreds of millions in expenditures for each major bank.
ANZ Bank New Zealand stated that implementing BS11 was the largest-ever regulatory project for ANZ Group, involving 700 staff across several countries and costing over NZD580 million (US$356 million). Industry estimates put the total cost to banks at well over NZD1 billion (US$614 million).
While the policy development faced “significant pushback” from banks, McKinnon said bank CEOs can now see their institutions are more resilient and ready to isolate local systems if needed.
The outsourcing policy requires banks to have plans ensuring business continuity and the ability to manage risks even in crisis scenarios.
With the extensive work now complete, McKinnon said his team will continue close oversight to ensure outsourcing policies enhance rather than undermine the soundness of New Zealand’s heavily foreign-owned banking system.
The Reserve Bank takes a “neutral” stance on outsourcing itself, neither preventing it nor guiding what should be outsourced. The policy’s focus is ensuring outsourcing does not compromise financial stability.