New rules for non-deposit takers
New details of long running finance sector reforms have been unveiled including guarantees for depositors and universal oversight of all institutions taking deposits from the public.
Monday, December 6th 2021, 7:15PM
by Eric Frykberg
The guarantee will cover losses of up to $100,000 for each depositor.
There will also be a single regulatory regime for both bank and non-bank deposit takers.
This was announced in principle in April following a process of reform that started in 2017.
But the RBNZ has now unveiled draft legislation to make it happen, and is inviting feedback.
The new Deposit Takers Act will provide common oversight for both banks and non-bank deposit takers such as building societies, credit unions and retail-funded finance companies.
The Depositor Compensation Scheme will be prioritised ahead of the Deposit Takers Act and is hoped to be in force by 2023.
It will be funded by banks and non bank deposit takers themselves, but the cost will inevitably be passed on to the customer.
The $100,000 limit is a retreat from an earlier idea of far greater compensation for short term high level deposits.
This would cover instances where a person sold a house and a bank failure happened before the new house was paid for.
The proposed law makes allowances for these higher payments to be permitted, but does not expect them to be in place when the main bill becomes law.
The Reserve Bank Governor Adrian Orr said the scheme is a significant step towards strengthening the regulatory framework for all institutions that take deposits.
“The new Act will broaden and clarify the scope of our role, which has evolved significantly since the Reserve Bank began prudentially regulating banks more than 30 years ago.”
The proposed bill includes substantial criminal penalties for non compliance, with fines ranging up to $5million.
« Earnings surprises support equity returns | Classic hits of 2021 revisited (plus all the new releases) » |
Special Offers
Comments from our readers
No comments yet
Sign In to add your comment
Printable version | Email to a friend |