The Westpac Group has completed the transfer of about NZ$1.1 billion worth of assets to Westpac New Zealand from Australian parent Westpac Banking Corporation in a move that brings it into line with Reserve Bank requirements.
The transfer programme was put in place after non-compliance by Westpac with some bank registration conditions in 2008. This led to a review of Westpac's operating model in 2009 and ought to help prevent the situation where Westpac NZ was forced to take "corrective action" to address additional breaches of Reserve Bank registration conditions last year.
The Australian parent has transferred to Westpac NZ institutional customer deposits, institutional customer transactional banking, institutional customer lending (other than trade finance activities), debt capital markets activities carried out in helping corporate customers secure funding including customer loan syndication and securitisation arrangements, but not debt securities team activities, such as arrangement of commercial paper and bond programmes, corporate advisory, and customer foreign currency accounts.
In its last General Disclosure Statement Westpac NZ said business activities being transferred across from its parent include customer loans worth about NZ$6.2 billion, and customer deposits worth about NZ$5.8 billion. The bank estimated the business operations being transferred had revenue of about NZ$120 million in the nine months to June and net profit after tax of about NZ$74 million.
"The net assets transferred had a book value of approximately NZ$1.1 billion as at October 31, 2011," Westpac said today.
"In addition, Westpac NZ is required to hold liquid assets for New Zealand regulatory purposes in connection with the transferred assets and liabilities. A portion of these liquid assets were acquired from the NZ Branch (parent). These transactions were funded by an intra-group loan from the NZ Branch to Westpac NZ of NZ$3.1 billion together with part of the proceeds of an issue of shares by Westpac NZ to its parent company."
Westpac NZ CEO George Frazis told interest.co.nz last year the transfer, whilst inefficient, would have no impact on Westpac customers.
The changes to Westpac's operational model can be traced back at least as far as 2004. That was when Westpac, which had been operating in New Zealand solely as a branch of its Australian parent, agreed to incorporate in New Zealand. Westpac NZ was duly registered as a bank in November 2006, meeting the Reserve Bank's local incorporation policy that all systematically important banks operating in New Zealand be locally incorporated.
Since 2006 Westpac has run the dual registration operating model with Westpac NZ conducting its retail and business banking activities in New Zealand and the branch established to undertake its institutional and financial market activities. After an independent review of the operating model 2009, Westpac agreed to make changes.
The transfer was due to be completed by the end of 2011.