8 Dec 2010

Reserve Bank mulls powers to veto major bank deals

11:08 am on 8 December 2010

The Reserve Bank is considering giving itself the right to veto significant acquisitions by local banks, if it threatens the stability of the financial system.

In a consultation paper released on Tuesday, the Reserve Bank proposes that banks will need its approval before they make significant acquisitions, investments or business mergers.

Reserve Bank deputy governor Grant Spencer says the notice of non-objection that will be required will allow it to assess whether an acquisition could harm the wider financial system.

Mr Spencer says the planned change will bring it closer in line with international standards, and is timely after the global financial crisis.

Massey University economics and finance lecturer Claire Matthews says the plan is in line with what is happening in other countries.

She says it represents International Monetary Fund requirements and is line with internationally recognised core principles of banking supervision.

Responses to the consultation paper are due by the end of January.