Hon Dr Michael Cullen
Minister of Finance

12 September 2007

Reserve Bank to register all deposit takers

All deposit-takers will have to be registered by the Reserve Bank and comply with minimum prudential requirements under a new regulatory framework announced today by Finance Minister Michael Cullen.

The framework will apply to non-bank deposit-takers, including finance companies, building societies and credit unions. The Minister emphasised that this is a result of a major review of regulations spanning nearly two years and the new legislation required will take time to implement.

“This is not intended to be a ‘quick fix’ solution and it will not solve all the problems that some finance companies are currently facing,” Michael Cullen said.

The requirements will include:

- A credit rating from a rating agency approved by the Reserve Bank;
- A minimum amount of capital of $2 million;
- The need for a capital ratio, measured on a standardised and comprehensive basis;
- Restrictions on lending to persons that are related to the deposit-takers; and
- Fit and proper requirements for the directors and senior managers of deposit-takers.

“Legislation required to implement mandatory credit ratings will be introduced into Parliament this year, but there is nothing to prevent deposit-takers obtaining a credit rating now, which may well be a desirable course of action.

“Small deposit-takers – those with total assets of under $10 million – will be exempted from the need for a credit rating, but will have to disclose prominently that they are unrated. The government is committed to working with the private sector to help and educate ordinary depositors to understand credit ratings and disclosure statements.”

Deposit-takers will continue to be subject to trust deeds and be supervised by trustee corporations under the Securities Act, but trust deeds will have to comply with the new prudential requirements. Deposit-takers will also continue to be subject to public disclosure under the Securities Act, but this will be strengthened, and made more focused and user-friendly.

“I am hopeful that much of the required legislation will be enacted in 2008 and that at least some of the new requirements could be brought into force in 2009. However, there will be a transition period to enable deposit-takers to meet the new requirements.”

For more detailed information on key features of the new arrangements
please see the Reserve Bank's website http://www.rbnz.govt.nz.

ENDS

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