ANZ NZ working to rectify material breach of banking registration relating to Reserve Bank's outsourcing policy

ANZ New Zealand, the country's biggest bank, is in "material breach" of the outsourcing condition of its banking registration requirements.

The Reserve Bank's outsourcing policy requires systemically important banks like ANZ NZ to have the legal and practical ability to control and execute business functions they may outsource to another party such as IT processing, accounting and call centres.

The outsourcing policy exists to ensure any impact on the broader economy from the failure of a large bank, or a major bank's service provider, is minimised and to preserve options for the resolution of any big bank failures, the Reserve Bank says.

The Reserve Bank lists material breaches of banks' conditions of registration on its website. A new one relating to ANZ NZ was posted late last month, and is the only material bank breach listed that's classified as "open." It notes ANZ NZ notified the Reserve Bank of a breach on November 6 last year.

"Based on the information provided by ANZ and the nature of the non-compliance, the Reserve Bank has confirmed the breach as a material breach of condition 11 of ANZ’s Conditions of Registration," the Reserve Bank says.

The estimated timeframe of the breach is said to date from June 2022 until now.

In December 2023 Reserve Bank Director of Prudential Supervision Scott McKinnon told interest.co.nz all NZ's major banks met revised outsourcing requirements. This meant the big four Australian owned banks could cast off their Australian parents and operate independently, should they ever need to.

McKinnon's comments came after the big four banks themselves had said, after years of work involving thousands of staff and hundreds of millions of dollars, they'd met the Reserve Bank's new outsourcing requirements by an October 2023 deadline. ANZ NZ said, for it, this involved a five-year programme of work, costing more than $580 million. In May 2022 ANZ NZ CEO Antonia Watson told interest.co.nz she'd "love to have spent that money on customer propositions," but the outsourcing requirements would "protect the New Zealand banking system in some kind of crisis."

'A number of non-compliance issues'

The Reserve Bank says between April 2024 and September 2025 ANZ NZ reported; "a number of non-compliance" issues with some "relating to failure to maintain effective alternate arrangements and robust back-up [capability] which impacts ANZ’s ability to separate."

"The Reserve Bank has assessed each of these breaches to be individually a non-material breach of condition 11 of ANZ’s Conditions of Registration. However, when assessing materiality of breaches, the Reserve Bank undertakes a holistic assessment of the findings and has considered that the number and nature of instances of breaches indicate overall deficiencies in ANZ’s BS11 [outsourcing] oversight, processes and controls," the Reserve Bank says.

"While these issues had no financial impact, they are relevant to the Bank’s outsourcing and resolvability requirements and therefore, the Reserve Bank has concluded that collectively, the instances of BS11 breaches constitute a material breach of condition 11 of ANZ’s Conditions of Registration."

"ANZ has rectified the specific breach relating to the robust back-up arrangements and is undertaking broader work to strengthen processes and controls in the ongoing management of BS11, as part of a remediation programme that will need to be completed to the Reserve Bank's satisfaction. The Bank will keep the Reserve Bank informed about the progress of these efforts to ensure that the necessary uplift is delivered and deficiencies are remediated, the Reserve Bank says.

In its latest general disclosure statement ANZ NZ also acknowledges the non-compliance, noting it will keep the Reserve Bank informed of progress to ensure "the necessary uplift is delivered and deficiencies are remediated."

'ANZ NZ will continue to keep the RBNZ informed of its progress'

An ANZ NZ spokesperson told interest.co.nz the RBNZ's outsourcing policy includes a number of different compliance requirements for each in-scope outsourcing arrangement.

"From 1 June 2022 there were times when we identified issues with some of these requirements, which had no customer or financial impact."

"However, it is not accurate to say that ANZ NZ has not been materially compliant with the [revised] BS11 Outsourcing Policy to date," the ANZ NZ spokesperson says.

Two issues assessed as material breaches relate to "certain robust back up arrangements" that wouldn't operate as intended if ANZ NZ had to separate from its Aussie parent, and broader oversight, process, and control gaps in the ongoing management of the BS11 outsourcing policy. 

"The back-up arrangement issue has been resolved, and work is underway to strengthen the Bank’s BS11 processes and controls," the ANZ NZ spokesperson says.

"ANZ NZ will continue to keep the RBNZ informed of its progress."

*A version of this article was first published in our email for paying subscribers early on Thursday morning. See here for more details and how to subscribe.