Australasia tackles banking integration

Author: | Published: 1 Jul 2005

It has been more than 20 years since Australia and New Zealand entered into the Closer Economic Relations (CER) treaty. In this phase of the CER project, officials speak of creating a single economic market, with the prime focus on regulatory harmonization. Banking supervision provides a vivid test case for this project. The Australasian banking market is already substantially commercially integrated and the basis for regulation of capital adequacy in both countries is the Basel Accord, which has an explicit objective of the international convergence of banking standards.

This is fertile ground for regulatory harmonization and, with the new Basel II framework entering its implementation phase, the timing of such a project would be opportune. At the same time there are countervailing pressures, particularly arising from the recently announced local incorporation and outsourcing policies of the Reserve Bank of New Zealand (RBNZ), designed to ensure local banks are able...