Policy Guidelines - Banks and Non-Bank Deposit TakersCrown Retail Deposit Guarantee Scheme
Page updated 22 Oct 2008
The Minister of Finance has approved Policy Guidelines for officials to use when assessing applications for the Crown Deposit Guarantee Scheme. The Policy Guidelines set out what types of institutions will be eligible for the guarantee and what criteria and other factors may be considered by officials when assessing an application. The list of factors which may be considered by officials is non-exhaustive and officials may consider any other factors if they are relevant. Officials will assess each application on an individual basis. Further information on Qualifying Collective Investment Schemes will be made available in due course.
These guidelines cover the exercise of discretion under the delegated authority granted to the Secretary to the Treasury by the Minister of Finance regarding the management and administration of the Crown’s Retail Deposit Guarantee Scheme.
Discretion
The decision to enter into a Crown Guarantee with any specific entity is at the sole discretion of the Crown.
Overarching Principles
The grant of a Crown Guarantee to an Entity must be “necessary or expedient in the public interest.”
The key “public interest” factors when considering the provision of a Crown Guarantee are:
- a the maintenance of public confidence in New Zealand’s financial system; and
- b maintaining the confidence of general public depositors in New Zealand financial institutions.
Entities Eligible to Apply for the Crown Guarantee
The Entities eligible to apply for the Crown Guarantee are:
- a Banks registered under the Reserve Bank of New Zealand Act 1989;
- b Building Societies as defined in the Building Societies Act 1965;
- c Credit Unions as defined in the Friendly Societies and Credit Unions Act 1982;
- d Other bank like entities (such as finance companies), existing on 12 October 2008, which issue Debt Securities.
- e Other bank like entities (such as finance companies), established after 12 October 2008, which issue Debt Securities and have a BBB- rating or higher.
- f Qualifying Collective Investment Schemes.
Debt Securities mean any interest in or right to be paid money that is, or is to be, deposited with or lent to any person (whether or not the interest or right is secured by a charge over any property); and includes,
- a Debenture, debenture stock, bond, note, certificate of deposit, and convertible note; and
- b An interest or right that is declared by regulations to be a debt security for the purposes of the Securities Act 1978; and
- c A renewal or variation of the terms or conditions of any such interest or right or of a security referred to in paragraph (a) or paragraph (b) of this definition;
but does not include;
- a An interest in a contributory mortgage where the interest is offered by a contributory mortgage broker; or
- b Any such interest or right or a security referred to in paragraph (a) or paragraph (c) of this definition that is declared by regulations not to be a debt security for the purposes of the Securities Act 1978.
A Qualifying Collective Investment Scheme means:
- a an arrangement or scheme to which a participatory security (within the meaning of section 2(1) of the Securities Act 1978) relates;
- b a superannuation scheme (within the meaning of section 2A(1) of the Superannuation Schemes Act 1989); or
- c a unit trust (within the meaning of section 2(1) of the Unit Trusts Act 1960),
that invests exclusively in:
- a New Zealand government securities; or
- b Debt Securities issued by an entity that is covered by the Crown Deposit Guarantee Scheme.
Relevant Criteria
Entities applying for the Crown Guarantee should meet all of the following criteria:
- a issue Debt Securities or be a Qualifying Collective Investment Scheme;
- b be in the business of borrowing and lending, or providing financial services, or both;
- c carry out a substantial portion of their business in New Zealand; and
- d do not primarily provide financial services or lend to related parties and/or group members.
Other factors that may be considered in exercising discretion to offer, or refuse to offer, the Crown Guarantee
- a The size of the Entity;
- b The credit worthiness of the Entity, including any rating agency reports on the Entity;
- c The number of depositors in the Entity;
- d The related party exposure of the Entity;
- e The quality of the information provided by the Entity;
- f Whether the accounts of the Entity are audited;
- g That the business practices of the Entity meet reasonable standards;
- h That the individuals with control of the Entity are of good character;
- i That the individuals with control of the Entity have the business experience and acumen relevant to the operation of the Entity;
- j Whether, and the extent to which, the Entity’s overall business is bank-like in nature;
- k The length of time the entity has been in business;
- l The track record of the entity with respect to such matters as whether it has met its payments as they fell due and maintained solvency;
- m The importance of the entity to the New Zealand financial system; and
- n Any other factors relevant to:
- the maintenance of public confidence in New Zealand’s financial system; and
- maintaining the confidence of general public depositors in New Zealand financial institutions.