RBNZ specifies rules on bank takeovers that allow it to block deals where one bank is buying another with assets worth more than 25% of the buyer's capital

The Reserve Bank of New Zealand has introduced a new policy on significant bank acquisitions that means a bank will have to notify the Reserve Bank when it bids for another bank with assets worth more than 15% of its capital.

Any bank buying another bank with assets worth more than 25% of the buying bank's capital will have to obtain a 'notice of non-objection' from the Reserve Bank, it said.

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The Reserve Bank has introduced a new policy applying to significant acquisitions undertaken by locally incorporated banks.

Reserve Bank Deputy Governor Grant Spencer said the policy will take effect from 31 December 2011 through a change in banks’ conditions of registration and will apply to transactions planned to take effect on or after 1 April 2012.

“The new policy will strengthen the Bank’s supervisory powers over significant acquisitions undertaken by New Zealand banks,” Mr Spencer said. “Significant acquisitions can materially affect the risk profile of the acquiring bank.”

The new condition of registration will require banks to:

• notify the Reserve Bank of any acquisition the bank intends to undertake which is larger than the ‘notification threshold’; and
• obtain a notice of non-objection from the Reserve Bank prior to undertaking an acquisition which is larger than the ‘non-objection’ threshold.

The notification threshold is reached when the total consideration for the acquisition exceeds 15 percent of the bank’s capital base, or when the total value of the assets purchased exceeds 15 percent of the bank’s total assets.

The non-objection threshold is defined similarly, but at the higher level of 25 per cent of capital or assets.

The Reserve Bank has also issued a new banking supervision handbook document on significant acquisitions.