New Zealand’s regulatory approach Given that the banking industry in New Zealand has always been dominated by foreign-owned banks, particularly from Australia and the United Kingdom, any development that makes supervision of the parent bank more effective is welcomed by us. From the Reserve Bank’s perspective, though, we have not seen a pressing need to change our regulatory structures in a similar way.
The reasons for this are two-fold. First, we take a rather different approach to promoting financial system stability, an approach which relies less on direct regulation and more on the use of market disciplines and the internal incentives for banks to behave prudently (I will return to this shortly). Secondly, we see our present regulatory structure as being effective.