Guidance Note: Incorporation outside New Zealand Standard

Guidance Note Incorporation outside New Zealand Standard 3 IN CONFIDENCE Contents Guidance Note version history 2
Disclaimer............................................................................................................................................................ 2
Contents 3
Use and status of the Guidance 4
Part A: About this Standard 5
Overview ............................................................................................................................................................... 5
Context and purpose of the Incorporation outside New Zealand Standard ........................................... 5
Part B: Guidance on the Incorporation outside New Zealand Standard 6
Part 1: Preliminary provisions ............................................................................................................................ 6
Title (Clause 1)..................................................................................................................................................... 6
Interpretation (Clause 3)...................................................................................................................................7
Transitional, savings, and related provisions (Clause 4) ..........................................................................7
Part 2: requirements regarding country of incorporation ........................................................................... 7
Licensed deposit taker must incorporate under New Zealand legislation unless certain
requirements are met (Clause 5) ...................................................................................................................7
Meaning of wholesale client (Clause 6)....................................................................................................... 8
Meaning of large corporate or institutional client (Clause 7) ............................................................... 9
Part 3: Assessment by deposit taker (Clauses 8-11) ..................................................................................... 11
What happens if client no longer meets definition (clause 10)............................................................12
Part 4: Schedule 1. Transitional, savings, and related provisions .............................................................. 15
Assessing whether existing client meets definition.................................................................................15
Restriction on continuation of existing transactions with existing clients.........................................15
Part 5: Branch-to-subsidiary asset ratio ......................................................................................................... 17

Guidance Note Incorporation outside New Zealand Standard 4 IN CONFIDENCE Use and status of the Guidance The purpose of this Guidance is to assist licensed deposit takers (or deposit takers) to interpret and comply with the Deposit Takers (Incorporation outside New Zealand) Standard 2027 (the Standard). This recognises that the Standard deals with technical subject matters and there may be no case law or other external reference points to assist with its interpretation. Guidance will assist individual deposit takers with their own compliance and support a more consistent approach across the industry. The Guidance assists by:
 Outlining the context and purpose of the Standard. Technical content is better understood with awareness of the policy intent at the time it was drafted.  Outlining our preferred interpretation in relation to some clauses, where we have been made aware of differing interpretations by deposit takers.  Providing examples of good practice in complying with the Standard. To assist in using the Guidance:
 Terms that are defined in the Standard or the Deposit Takers Act 2023 (the DTA) have the same meaning in this guidance.  The Guidance is designed to be read alongside the Standard. Sections of this Guidance have the same headings as sections of the Standard. Clause numbers are those from the Standard.  The Guidance will not necessarily cover every clause in the Standard. Given its status as an interpretation aid, where we feel a clause (when read in conjunction with the explanatory note attached to the Standard) is sufficiently self-explanatory, no additional Guidance is being provided.  In event of any conflict between the text of the Standard and this Guidance, the Standard prevails. The Standard is secondary legislation made under the DTA, while the Guidance does not have formal status. The Guidance represents our view and is therefore an authoritative indicator of that view. However, ultimately, it is for a court to determine the correct interpretation of the Standard.  The Reserve Bank will periodically review and update the Guidance. We may change our Guidance or our interpretation of the Standard if we consider this appropriate. We do not do this lightly and will endeavour to notify deposit takers in advance if we are considering amending the content of the Guidance.  This Guidance is not legal advice. We encourage deposit takers seek their own professional advice, as it is their responsibility to determine their obligations and ensure that they comply with the requirements of the Standard.  The Guidance relates to the version of the Standard as at [day month year].  We welcome feedback on the Guidance at any time.

Guidance Note Incorporation outside New Zealand Standard 5 IN CONFIDENCE
Part A: About this Standard
Overview

Overseas licensed deposit takers (branches) are an important part of New Zealand’s financial
system. They differ from locally incorporated subsidiaries of overseas deposit takers in that they are part of a legal entity incorporated outside New Zealand. They offer benefits to the New Zealand economy through the provision of products and services to wholesale customers.
We do not apply the full suite of prudential regulation to branches because of the nature of
their operations and legal structure. The Incorporation outside New Zealand Standard includes certain requirements that must be met by branches, primarily relating to how branches carry on business. Context and purpose of the Incorporation outside New Zealand Standard
The Standard requires that all deposit takers must be incorporated in New Zealand unless they
meet certain conditions that allow them to operate while being incorporated outside New Zealand. The Standard does not contain all the requirements that apply to branches.
For example, disclosure requirements for branches are included in the Deposit Takers
(Disclosure Statements) Standard 2027. Examples of requirements included in the Standard include a size cap for branches and a requirement that they can only do business with wholesale clients.
The Standard is relevant to branches. Most of the requirements apply to all branches, but
some are only relevant to branches that also have a locally incorporated subsidiary that is a licensed deposit taker (referred to in this document as “dual-operating branches”). We refer to branches that are not part of a group with a New Zealand licensed deposit taker as “standalone branches”.
Table 1: Applicability of the Standard’s requirements to classes of deposit takers
Clause/section All deposit takers Stand-alone branches Dual-operating branches Licensed deposit taker must incorporate under New Zealand legislation unless certain requirements met (Clause 5) ✓ ✓ ✓ Wholesale client definition (Clause 6)  ✓  Large corporate and institutional client (Clause 7)   ✓ Assessment by deposit taker (Clauses 8-11)  ✓ ✓
Schedule 1. Transitional, savings,
and related provisions
 ✓ ✓

Guidance Note Incorporation outside New Zealand Standard 6 IN CONFIDENCE
Part B: Guidance on the Incorporation outside New Zealand
Standard
Part 1: Preliminary provisions
Title (Clause 1)
6. This Standard regulates whether a deposit taker must be incorporated under New Zealand
legislation. It applies size and client restrictions to deposit takers that are incorporated outside New Zealand. Therefore, it is titled the Deposit Takers (Incorporation outside New Zealand) Standard 2027.
7. The effect of the Standard is that a deposit taker that is an overseas person can only carry on
the business of a deposit taker if it meets specific requirements. Otherwise, it would have to cease carrying on business as a deposit taker or become incorporated under New Zealand legislation.
8. The Standard is relevant for all branches. Most of the requirements apply to all branches, but
some are only relevant to dual-operating branches.
9. Diagram A shows the stylised structure for an overseas deposit taker that has a locally
incorporated subsidiary that is a licensed deposit taker and also operates a deposit taking business in New Zealand itself (ie, through a branch).
10. The dotted line represents that while the overseas deposit taker and the overseas licensed
deposit taker are the same legal entity, they are licensed in two jurisdictions. The subsidiary is a separate legal entity that is only licensed in New Zealand. Together, the subsidiary and the overseas licensed deposit taker are the dual-operating group. Diagram A: organisation structure for a dual-operating group Overseas deposit taker Dual-operating branch (same legal entity as the overseas deposit taker) Locally incorporated subsidiary (separate legal entity) New Zealand

Guidance Note Incorporation outside New Zealand Standard 7 IN CONFIDENCE Interpretation (Clause 3)
11. This clause provides definitions that are used in the Standard. Consistent with section 20 of the
Legislation Act 2019, words or expressions used in the Standard have the same meaning as in the Deposit Takers Act 2023 (DTA) or referring legislation. For example, the definition of “overseas licensed deposit taker” can be found in section 6 of the DTA. Transitional, savings, and related provisions (Clause 4)
12. Branches can maintain a relationship with existing clients (as at December 2028), provided they
assessed that these clients met the relevant client definition within the specified timeframe. This is further described in Schedule 1 of the Standard and Part 4 of this Guidance.
Part 2: requirements regarding country of incorporation
Licensed deposit taker must incorporate under New Zealand legislation unless certain requirements are met (Clause 5) New Zealand business of the branch
13. The key requirements are set out in clause 5. They relate to the New Zealand business of the
overseas licensed deposit taker, which is commonly referred to as a branch of the deposit taker. In all cases, the New Zealand branch business of the overseas deposit taker:
 must not exceed $15 billion in assets; and
 must be less than 50% of the deposit taker’s total business.
14. The Standard provides that the assets must be calculated by reference to the financial
statements (see clause 5(2)) 1
. The measurement of total assets of a branch’s New Zealand business should be prepared as if that business were conducted by a company formed and registered in New Zealand. This will also be consistent with the measurement of total assets of a branch required by the Deposit Takers (Reporting) Standard 2027.
15. The Standard requires that that the New Zealand assets of a branch must not exceed the $15
billion cap at all. This is an ongoing obligation. We do not expect continuous monitoring of compliance with clause 5(1)(b) as a matter of course, but a proportionate approach could consider how likely a deposit taker is to breach the requirement and monitor accordingly.
16. We expect a risk-based approach to compliance to mean that for branches that are not at risk
of breaching this requirement, financial statements may be the primary way to ensure and demonstrate compliance.
17. We expect a deposit taker to be in regular contact with their supervisor and monitor
appropriately if it is possible that they may breach the asset threshold.
New Zealand business and cross-border activities
18. In relation to attribution of cross-border activities, we note that all branches licensed under the
DTA will be authorised to use restricted words. Any activity carried on in New Zealand by the ____________ 1 Note the reference to the branch’s “New Zealand business”. We expect this means it would not apply to the businesses of other separate companies that are also subsidiaries of the same overseas deposit taker, if they don’t meet the relevant definitions (eg, if they are not deposit takers). See following footnote.

Guidance Note Incorporation outside New Zealand Standard 8 IN CONFIDENCE overseas deposit taker that could require an authorisation would instead be attributed to the licensed branch for regulatory purposes.
19. The overseas deposit taker would not require separate authorisation under sections 428 or
429, but the activity would need to be consistent with the IoNZ Standard and the branch’s conditions of licence. Activity that does not meet the definition of “carrying on activity in New Zealand” does not require an authorisation nor attribution to the licensed branch. 2 Client restrictions
20. In addition, clause 5(1)(d) sets client restrictions for branches. For a stand-alone branch, its
business must be limited to “wholesale clients”. If the branch is a dual-operating branch, its business must be limited to “large corporate or institutional clients” (see Table 1).
21. A “large corporate or institutional client” will always also be a “wholesale client” so, in effect,
stand-alone branches can do business with both categories of clients.
22. The Deposit Takers Regulations 2025 3 provide that branches are exempt from the DCS unless
the deposit taker provides a material amount of services to retail clients. Branches may be required to demonstrate that they are only conducting business with wholesale clients beyond 2028 to be exempted from the DCS.
23. The policy intent of both the “wholesale client” and “LCIC” definitions is to define who the
clients of branches may be. For the avoidance of doubt, the definitions are not intended to regulate activities that are out of scope of the IoNZ Standard. For example, the Standard does not limit activities such as issuing bond and securities to New Zealand wholesale investors, nor acting as arranger for other clients who are issuing bonds, including both primary issuance and secondary trading. Meaning of wholesale client (Clause 6)
24. Clause 6 gives the meaning of wholesale client for the purposes of clause 5. Whether a deposit
taker’s client is a wholesale client depends on the deposit taker assessing that the client or an associated person of the client is 1 or more of the types of wholesale client specified in clause
6. Associated person is defined in section 7 of the Act.
25. We expect that all deposit takers already have a strong understanding of their obligations to
monitor which of their clients are wholesale clients under either the Financial Markets Conduct Act 2013 (“FMC Act”) or the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (“FSP Act”).
26. Consistent with our approach to supervision, we expect to see evidence of good systems and
controls, as part of robust risk management practices.
27. There are no forward-looking provisions for wholesale clients based on a reasonable
expectation of them meeting the definition (unlike for LCICs in clause 7). There are several different ways for a client to qualify as wholesale, and the effective thresholds for that are effectively lower than those in clause 7. ____________ 2 For more context on the perimeter and attribution of activities to the branch see “Interpretation of carrying on activity in New Zealand” in the Summary of submissions and policy decisions on use of the word 'bank' under the DTA. Any activities that would not constitute “carrying on activity in New Zealand” would not need to be attributed to the branch, nor recorded on the branch’s balance sheet. This means that those activities would not be subject to the IoNZ Standard. Conversely, anything that does meet the “carrying on activity in New Zealand” test would need to be attributed to the New Zealand branch. 3 See Regulation 6 “Debt security issued by certain overseas licensed deposit takers is not protected deposit” of the Deposit Takers Regulations 2025 | New Zealand Legislation.

Guidance Note Incorporation outside New Zealand Standard 9 IN CONFIDENCE Meaning of large corporate or institutional client (Clause 7)
28. Clause 7 gives the meaning of large corporate or institutional client. This supports the
requirement that applies to dual-operating branches in clause 5.
29. Whether a deposit taker’s client is a large corporate or institutional client depends on the
deposit taker assessing that the client meets, or is reasonably expected to meet, any of the tests in clause 7(2).
30. A branch may assess that the person is reasonably expected to meet the relevant test up to 3
years from the assessment date (clause 7(1)(a)), unless the test specifies a different time (clause 7(1)(b)).
31. We expect that all deposit takers have a strong understanding of their obligations to monitor
the financial information of large clients, given they often represent relatively large exposures on their balance sheet. We expect this would support good risk management. Types of qualifying clients
32. Broadly, clause 7(2) means that clients can qualify as LCIC if they have:
 $75 million in total assets (7(2)(a))
 $50 million in turnover (7(2)(b))
 $250 million of assets under management for funds management entities
33. Most of the remaining subclauses add details on how the above intent is implemented, or
specify a different treatment for individual cases, including government agencies. We describe these details below.
34. In the case of funds managers, all of the assets managed are not on the client’s financial
statements (they are not owned by the client), so we expect the deposit taker to make an assessment of the assets under management by the client.
35. Different types of fund management entities can qualify as LCICs as long as they meet the
relevant threshold. This includes entities who are mandated to manage funds on behalf of third parties, for instance under an investment management agreement.
36. Clauses 7(2)(c), (d), and (e) set the relevant tests, with defined terms in clause 7(5). Following
industry’s practice, we refer collectively to these 3 tests as “assets under management” (AUM). To qualify as LCIC, the client must have AUM over $250 million.
37. In the case of special purpose vehicles (“SPV”), a dual-operating branch can make an
assessment of the expected assets of the SPV by the completion of the project (see clause 7(2)(f)(ii)). This is likely to be relevant in the case of infrastructure projects (eg, building a motorway or wind farm) where the SPV requires upfront investment and will accrue assets over the course of the project.
38. Clause 7(2)(f) refers to a “project”. We expect the term “project” to be interpreted broadly. We
avoid having a prescriptive requirement or exhaustive list to not unintentionally exclude projects that should be in scope.

Guidance Note Incorporation outside New Zealand Standard 10 IN CONFIDENCE
39. Examples of projects could be infrastructure projects, securitisation transactions, property
finance, project financing, leveraged financing, structured financing, property financing or other similar financing structures. These examples are not exhaustive.
40. Government agencies can qualify as LCICs, as per clause 7(2)(g). The inclusion of government
agencies is not subject to assets, turnover, or other quantitative thresholds. See the definition in clause 7(5).
41. If the client is a securitisation warehouse entity, the time for being reasonably expected to
meet the asset threshold is at some point during the life of the warehouse (clause 7(2)(h)). This means this test is not constrained by the 3-year timeframe.
42. The intent is also that a securitisation warehouse entity is considered a LCIC until they are
wound up, as they met the assets threshold at some point during their lifecycle (see exception in clause 10(1)). This aims to avoid unintended consequences on branches’ funding structures.
43. Clause 7(4) adds further clarity on what tests must be met within the 3-year timeframe set out
in clause 7(1)(a).
Forward-looking provision
44. A client will meet the definition if the client is assessed as “reasonably expected” to meet any of
the tests under clause 7(2) within 3 financial years after the assessment date (clause 7(1)(a)).
45. The 3-year timeframe is aligned with the regular reassessment period for these clients in clause
9(2), to ensure consistency. See Guidance on clauses 8-11.
46. The intent is to provide for a window where the branch may provide their services to the client
while they are growing, if they expect the client to meet the tests within the period. This aims to balance the effect of the thresholds.
47. A specific growth “event” is not needed to meet the definition, as the reasonable expectation
could also be based, for instance, on a projection of regular, steady growth. While an “event” is not necessary to use this clause, it could still be the basis for assessing that a client is reasonably expected to meet the tests under clause 7(2).
48. Examples of “events” could include a merger or acquisition, a joint venture, a contract, or a
major investment by the client. For instance, an investment to be funded via raising debt and/or equity in the near future.
49. Branches may rely on the client’s projections and other types and sources of information as
long as they provide reasonable grounds to expect the client to meet the relevant tests. Other examples could include business plans and estimates, from the client or other parties, such as advisors or consultancy firms. We expect the growth projections to be reasonable, as well as the overall assessment of expected growth.
50. The Standard does not prescribe specific methods for branches to assess client eligibility under
this clause. We expect branches to maintain an appropriate process to ensure clients are reasonably expected to meet the tests within the specified timeframe.
51. See Diagram B for a visual explanation of how onboarding of clients under clause 7(1)(a) would
work.

Guidance Note Incorporation outside New Zealand Standard 11 IN CONFIDENCE Diagram B: Onboarding client under forward-looking provision
Part 3: Assessment by deposit taker (Clauses 8-11)
52. The Standard sets out when a deposit taker must assess a client as meeting the requirements
for clients with whom a branch may do business. The assessment must be made:
 for a new client, at the time immediately before they become a client (clause 8); and  for a current client 4 , after every third financial year after the last assessment (clause 9).
53. Clause 9 of the Standard requires a deposit taker to periodically assess whether their clients
continue to meet the requirements in the Standard to be wholesale clients or LCIC (as the case requires). These assessments must occur (at most) as soon as reasonably practicable after every third financial year after the last assessment.
54. For example, If the initial assessment occurs in the year ended 30 June 2030, the next
assessment must be carried out after the third financial year after the last assessment, ie after the year ended 30 June 2033, ie in the 2034 financial year.
55. The meaning of “as soon as reasonably practicable” may depend on the circumstances. For
instance, if financial statements were relevant to the assessment (see clause 11), then this would be as soon as reasonably practicable after the person's financial statements for that third financial year are available.
56. The timeframe aims to provide flexibility for branches to align the clients’ reassessments with
their internal review cycles. The intent is that the period is longer than the treatment of wholesale investors under clause 44 of Schedule 1 of the FMC Act.
57. We expect branches to be able to demonstrate to supervisors that they have robust practices
in place to monitor the status of their clients with regards to the relevant definition. This includes both the assessment before onboarding the client (clause 8) and the periodic reassessment in clause 9. ____________ 4 For the treatment for existing clients when the Standard commences, see Part 4 of this Guidance.

Guidance Note Incorporation outside New Zealand Standard 12 IN CONFIDENCE
58. Branches have flexibility in how they design their client assessment processes. What process is
appropriate may vary depending on how a client meets the relevant definition. For instance, under clause 6(1)(b) a branch could make an assessment of whether a person is a “wholesale investor” (within the meaning of clause 3(2) of Schedule 1 of the FMC Act), without necessarily requesting the relevant certificate, as the certification process is separate.
59. There could be different ways of conducting this assessment. For instance, a branch may
assess that the client owns or has owned in the last 2 years “a portfolio of specified financial products of a value of at least $1 million (in aggregate)” (see clause 38 of Schedule 1 of the FMC Act). By assessing a client’s information, e.g., accounts and transactions, the branch may assess that the client meets the “investment activity criteria” and hence meets clause 6(1)(b) of the Standard.
60. However, other ways of assessing a client may require branches to rely on the relevant
certificate, as it is included in the referenced definition. For example, for clauses 6(1)(c) and 6(1)(d) the “eligible investor” definitions include certification requirements.
61. In the event that a client changed their financial year before the next periodic assessment
required by clause 9, the date of the periodic assessment may change to reflect the client's new financial year. This is, the assessment must still be carried out “after every third financial year”. This is both for an earlier or later new financial year.
62. Clause 11 requires a deposit taker to rely on a person’s financial statements when assessing
them under clauses 8 to 10 but only but only to the extent to which the information is relevant to the assessment. We expect that financial statements may not be relevant, for instance, where a person qualifies as a wholesale client as defined in clause 6.
63. This also means that for clients who are not relying on financial statements to meet the
definitions, the reassessment will not have to be tied to the availability of financial statements. The reassessment must still be carried out after every third financial year after the last assessment (clause 9(2)).
64. Branches may, when assessing associated persons of large or global entities, use the scale of
the client’s holding entity to determine whether they meet the relevant test. What happens if client no longer meets definition (clause 10)
65. If a deposit taker assesses that a client no longer meets the relevant definition, the Standard
provides that the client is still treated as meeting the definition for up to 6 months after the client’s financial statements for the next financial year become available (an “extra period” of approximately 18 months).
66. The extra period ends earlier if the deposit taker either assesses that the person meets the
definition in clause 6 or 7 (as the case requires), or ends the client relationship. The effect of this provision is that a deposit taker has a period to reassess the client, taking into account the next financial statements, in case the client’s situation changes.
67. The extra period can be thought of as consisting of an initial remediation period of
approximately 12 months where a client may meet the definition again, or confirm they are not meeting it over a sustained period. If the client fails to meet the definition after the remediation period, branches are required to offboard them within 6 months.

Guidance Note Incorporation outside New Zealand Standard 13 IN CONFIDENCE
68. After the remediation period ends and the client is still not meeting the definition, we expect
that a deposit taker would not enter into any transactions with maturity dates beyond the end of the extra period.
69. Clients who stop meeting the relevant definition and would have to be offboarded under
clause 10, but who also have a non-performing loan, are exempt from the requirement to be offboarded, but only in relation to the non-performing loan (see clause 10(3)(a)).
70. This means that branches can’t enter into new transactions with the client after the extra
period, but they may keep the non-performing loan until it is written off, paid, disposed of, or varied and repaid.
71. We expect that branches will be able to demonstrate to supervisors that they have established
processes for off-boarding clients if and when they no longer meet the relevant client definition. Treatment of outstanding transactions when offboarding clients.
72. When a branch is required to offboard a client under clause 10, the Standard provides for the
treatment of any outstanding transactions. This is:
 existing transactions can continue until maturity (see clause 10(3)(b))  amending or restructuring an outstanding transaction will also be permitted, provided it doesn’t extend the original maturity date (see clause 10(4)(b))  any new transactions necessary to carry on the client’s business will be permitted if they have a maturity date before the end of the “extra period” (see clause 10(4)(a))  transactions with maturity dates beyond the end of the “extra period” are not permitted  any new transactions after the “extra period” are not permitted either, as the client is no longer a client.
73. Diagram C below provides a summary of the offboarding timeline.

Guidance Note Incorporation outside New Zealand Standard 14 IN CONFIDENCE Diagram C: remediation and off-boarding periods for clients
74. See Diagram D below for a visual explanation of how onboarding of clients under clause 7(1)(a)
would work, connected to the offboarding process if they failed to meet the growth expectations at the following assessment. This diagram combines Diagrams B and C. Diagram D: Onboarding under forward-looking provision and offboarding (if required)

Guidance Note Incorporation outside New Zealand Standard 15 IN CONFIDENCE Treatment of outstanding transactions of clients with non-performing loans under clause 10(3)
75. When a branch has to offboard a client under clause 10, and the client has a non-performing
loan, the Standard provides that the branch may continue to treat that person as a client in relation to the non-performing loan (clause 10(3)(a)). This means that clients with nonperforming loans are exempt from being offboarded under clause 10 until the loan is written off, paid, disposed of, or varied and repaid.
76. These provisions provide some flexibility for normal business fluctuations, for instance around
the LCIC thresholds. The intent is also to support the branches’ clients’ continued access to financial products and services regardless of short-term fluctuations, while ensuring that only the large clients are dealing with dual-operating branches. We expect this to minimise unnecessary compliance costs for branches.
Part 4: Schedule 1. Transitional, savings, and related provisions
Assessing whether existing client meets definition
77. Clause 1 of Schedule 1, Part 1 sets out how and when to assess existing clients for transitional
purposes. Branches have an 18-month window before and after the Standard comes into force to assess their existing clients.
78. This aims to provide flexibility to align this assessment with branches’ internal review cycles.
The timeframe is consistent with the clients’ regular reassessment period (around 3 years).
79. However, we expect branches to have been preparing to comply with the Standard when it
comes into force. Branches are required to not do business with clients who don’t meet the relevant definitions set out in clause 5(1)(d) when the Standard comes into force.
80. For the avoidance of doubt, there is no “offboarding” provision, nor “extra period” for existing
clients when the Standard comes into force. Those provisions from clause 10 don’t apply to existing clients when the Standard commences. See clause 1(4) of Schedule 1, Part 1. Restriction on continuation of existing transactions with existing clients
81. Clause 2 of Schedule 1, Part 1 sets out a transitional provision to deal with any potential case of
non-compliance with clause 5(1)(d) when the Standard commences.
82. This provision could be applied if a branch had a non-material number of clients with
outstanding transactions beyond December 2028. The Bank may bilaterally engage and approve the branch to keep those transactions, under some conditions, up to a date specified by the Bank.
83. The conditions include that:
 the existing transactions of the deposit taker with existing clients who do not qualify under the transitional provision are not material;  we must be satisfied that the deposit taker or its subsidiary continuing with the relevant transactions would not compromise the safety and soundness of the deposit taker; and

Guidance Note Incorporation outside New Zealand Standard 16 IN CONFIDENCE  the deposit taker or the transaction meets any other conditions specified by the Bank in its approval.
84. For assessing a transaction’s materiality, the Bank may have regard to the transaction itself, or
to the transaction together with other transactions.
85. We expect deposit takers to be able to comply with the IoNZ Standard from December 2028
and as such we expect this transitional provision to only be used as an exception. We also expect that if any branch projected to be in such situation in December 2028, they should have already advised their supervisor.

Guidance Note Incorporation outside New Zealand Standard 17 IN CONFIDENCE
Part 5: Branch-to-subsidiary asset ratio
86. The branch policy includes, for dual-operating branches, a requirement for sufficient
separation/delineation between the branch and the subsidiary. It also includes potential specific risk mitigants for any identified risks.
87. One of these risk mitigants is the “branch-to-subsidiary” asset ratio. This limits the total assets
of the branch relative to the assets of the locally incorporated subsidiary in the group. For example, a 1:1 ratio would mean that the assets of the branch can’t exceed the assets of the locally incorporated subsidiary in the group.
88. This limit will be applied using conditions of licence under section 24 of the DTA.