Although New Zealand is a small country and has a somewhat unusual banking system—in that the four largest banks, which form well over 80 percent of the market, are Australian owned, and the next largest, Kiwibank, is effectively owned by the government—it has taken some striking steps in bank resolution that make it an interesting example for European countries to consider. The overriding precepts of the system are that the taxpayer should not have to pay for bank failure however large the bank and that the vital functions of the large banks have to continue uninterrupted despite the failure. Furthermore, since all the systemically important financial institutions (SIFIs) are foreign owned, the way in which they are structured must be such that the New Zealand authorities can resolve the parts in their jurisdiction satisfactorily, irrespective of what their owners and the Australian authorities decide to do.

For small banks whose individual closure would have no implications for the stability of the financial system, the regime is simple. Such banks will simply be closed and the normal rules of insolvency as applied to any other company will be applied. The only difference is that the central bank is able to step in and have the bank placed in statutory management (an equivalent of receivership) so that it can control the insolvency process if necessary. While no banks failed in the global financial crisis (GFC) in New Zealand, this form of statutory management was applied to the largest of the finance companies that failed (South Canterbury Finance), so the possible process is clear. Other than Kiwibank, none of the other retail banks except the four largest, either jointly or separately, has a significant market share. (Kiwibank will presumably be recapitalized by its owner and, as a narrow bank, it should not be exposed to high risks, except possibly through its mortgage portfolio.)

For the large banks, the regime is a little more complicated. First of all, each bank must be locally incorporated, separately capitalized, and locally managed.