RBNZ registers Bank of China to provide banking services in New Zealand as a branch
The Reserve Bank of New Zealand has registered Bank of China to provide banking services in New Zealand, bringing the total number of registered banks to 26.
Bank of China Ltd is incorporated in the People's Republic of China and will operate in New Zealand as a branch, the central bank said in a statement. A New Zealand subsidiary of the Bank of China, Bank of China New Zealand has been registered to provide banking services in New Zealand since November 2014.
Bank of China New Zealand said in a statement that the BoC branch license would allow BoC to increase wholesale lending to businesses in New Zealand and offers the flexibility for it to participate in and commit to larger scale projects.
According to a central bank spokesman, locally incorporated subsidiaries are separate legal entities from the parent bank. They are required, among other things, to maintain minimum capital requirements in New Zealand and have their own board of directors, including independent directors. In contrast, bank branches are essentially an extension of the parent bank with the ability to leverage the global bank balance sheet, in particular for larger lending transactions.
"Capital and governance requirements for branch banks are established by the home regulatory authority, in Bank of China's case this is the China banking Regulatory Commission. There are no local capital or governance requirements for registered bank branches in New Zealand," an RBNZ spokesman said.
"It is a way for them to do more business as it unshackles them a bit from the capital constraints," said John Kensington, head of banking and finance for KPMG in New Zealand.
In the latest disclosure statement for the year to Dec. 31, the BoC NZ unit reported a net loss of $795,000 versus a loss of $1.6 million in the prior year. Net operating income, however, was $21.6 million versus $8.7 million in the prior 12 months as the bank has made significant inroad since it set up shop here. Total assets were $1.7 billion versus $514 million in the prior year. According to Kensington, the bank is at the point where it should begin breaking even given the rising assets.