A Cabinet decision to adopt the final measures resulting from the Reserve Bank Act Review will see drafting commence for new legislation to be known as the Deposit Takers Act.
The measures announced by Minister of Finance Hon Grant Robertson will promote financial stability and protect deposits held in both bank and non-bank institutions. They conclude a comprehensive review of the Reserve Bank of New Zealand Act, and build on reforms already confirmed to update the objectives and decision-making processes of the Reserve Bank.
The new Deposit Takers Act will create a single regulatory regime for all bank and non-bank deposit takers (such as building societies and finance companies). It will also introduce a new deposit insurance scheme that will protect up to $100,000 per depositor, per institution in the event of a failure.
Reserve Bank Governor Adrian Orr said reaching this stage was a significant milestone in strengthening the regulatory framework for all institutions that take deposits, as well as introducing the new deposit insurance scheme.
“The Reserve Bank is responsible for regulating deposit takers to help ensure their safety and soundness, in line with our mandate to promote the prosperity and wellbeing of New Zealanders. This 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. It also modernises our regulatory processes and instruments.
“The reforms also provide important new enforcement tools which will help us to manage emerging issues, and an enhanced crisis management framework to effectively respond to any failures and minimise the impact on the financial system, the economy, and society.
“I would like to take this opportunity to thank everyone who made submissions during consultation, and who have supported us to get to the stage where we can start drafting this important legislation.”
Secretary to the Treasury Dr Caralee McLiesh said the Reserve Bank Act review was a highly successful collaboration.
“I’m immensely proud of how the review team drove this complex work programme forward, particularly last year during the pandemic response when we were undertaking public consultation on the new framework for deposit takers and finalising changes to the Reserve Bank’s objectives and decision-making processes through the Reserve Bank of New Zealand Bill.
“The enduring relationships and collaborative processes we have developed provide a very strong basis for working together closely in the future on macroeconomic and financial policy.
"The Reserve Bank's prudential regulation of deposit takers is critical to promoting prosperity and wellbeing. Financial stability helps protect New Zealander's savings, reduces the risks of unemployment, and enables confident participation in the financial system. The Bank will continue to independently set prudential policy, subject to strengthened accountability and transparency requirements and a requirement for it to have regard to the government’s Financial Policy Remit.”
Suzanne Snively has chaired the Independent Advisory Panel for the review of the Reserve Bank since it began in 2017. She acknowledged the hard work and focus of the Review Team.
“The team took into consideration the external advice from the panel and in this way, it was possible to collect evidence to test many options.”
The Reserve Bank will lead the implementation of the new Deposit Takers Act. Deposit insurance is being prioritised ahead of the rest of the Act coming into effect and is expected to be up and running in 2023. The next opportunity for further public input will be an exposure draft of the Act later this year.
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