Another important policy requirement that we are developing to protect the New Zealand financial system relates to the growing practice of outsourcing core bank functionality. Here, I am referring to the tendency for foreign-owned banks to move large parts of their functionality to the parent bank or to third parties - which are often in another country.
In New Zealand, this has been occurring on a significant scale. And it has not just been confined to the obvious areas, such as IT systems, accounting functions and the like. Outsourcing to the parent banks has also included the movement of risk management capacity, some treasury functions and some senior and mid-level management and technical expertise.