Trans-Tasman Council on Banking Supervision
The Council of Financial Regulators (CFR) plays a central role in coordinating and advancing trans-Tasman crisis resolution and planning arrangements. This is achieved through the CFR members' involvement in the Trans-Tasman Council on Banking Supervision (TTCBS). The TTCBS was established in 2005, by the Australian Treasurer and New Zealand Finance Minister who agreed on a Terms of Reference for the new body. The New Zealand Treasury and Reserve Bank of New Zealand (RBNZ) are also members of the TTCBS.
In recognition of the interdependence of the Australian and New Zealand financial systems, both countries enacted legislation in 2006 to implement reciprocal obligations to ensure that the respective bank regulators (APRA and the RBNZ) can support each other in the performance of their regulatory responsibilities at least regulatory cost. As a result:
- each bank regulator is required to support the statutory responsibilities of the other regulator relating to prudential regulation and financial system stability and, to the extent reasonably practicable, avoid any action that is likely to have a detrimental effect on financial system stability in the other country;
- where reasonably practicable, and having regard to urgency or other similar constraint, regulators must consult and consider the advice of each other before exercising a power that is likely to have a detrimental effect on financial system stability in the other country; and
- an administrator or statutory manager appointed to a bank must advise the regulator if a proposed action by them is likely to have a detrimental effect on financial system stability in the other country.
In Australia, these provisions are incorporated into the Australian Prudential Regulatory Authority Act 1998 and the Banking Act 1959, while in New Zealand they are incorporated into the Reserve Bank of New Zealand Act 1989.
Following the global financial crisis in 2008, the TTCBS stepped up discussion on crisis coordination. This led to the signing of a Memorandum of Cooperation (MOC) in 2010 which outlined the principles and responsibilities to which the TTCBS agencies would have regard when responding to a distress situation in a trans-Tasman banking group.
Crisis management plans of the CFR and its counterpart agencies in New Zealand were tested in 2011 in a cross-border crisis simulation exercise.