Open Bank Resolution - the New Zealand response to a global challenge

The Reserve Bank supervises registered banks with the objective of promoting the maintenance of a sound and efficient financial system and avoiding significant damage to the financial system from the failure of a bank. In recent years, the Reserve Bank has been working on the implementation of the Open Bank Resolution (OBR) policy as an option for responding to a bank failure to minimise the costs and disruption to the financial system and the wider economy, while minimising the cost to the taxpayer. This is a key issue for supervisors worldwide following the global financial crisis. This article assesses the framework in New Zealand against the global standards that are driving developments in other jurisdictions.