First Stage Of Consultation On Deposit Takers Act Implementation Launches
The Reserve Bank of New Zealand – Te Pūtea Matua has released its first consultation material on implementing the recently enacted Deposit Takers Act 2023 (the Act), with proposals for the Proportionality Framework and for levies to fund the Depositor Compensation Scheme (DCS).
The Deposit Takers Act modernises our regulatory framework to help ensure the safety and soundness of deposit takers in New Zealand.
This is a significant work programme for the Reserve Bank, including the development of new prudential standards, regulations, supervisory, enforcement and resolution practices, and work to stand up the new Depositor Compensation Scheme by late 2024. The new legislation is expected to be fully in force around 2028.
This multi-year work programme is starting with public consultation on:
- A Proportionality Framework; and
- Depositor Compensation Scheme Levies (both led by Reserve Bank); and
- The Statement of Funding Approach (led by Treasury).
As the funding approach and levy framework for the Depositor Compensation Scheme are related matters, the Treasury and Reserve Bank will share submissions from each consultation. People who wish to make submissions on both the Treasury’s Statement of Funding Approach consultation paper and the Reserve Bank’s levy framework consultation paper can choose to send both submissions to either agency.
“To assist with the next phase of implementation, the Reserve Bank and Treasury are engaging with the industry to inform our policy development and implementation of the new regime,” Director of Prudential Policy Kate Le Quesne says.
What is the Proportionality Framework?
Taking a proportionate approach to regulation means balancing its costs and benefits for deposit takers and the New Zealand public. The Deposit Takers Act requires the Reserve Bank to prepare a proportionality framework setting out how the Reserve Bank takes a proportionate approach when developing standards under the Act. In the framework, the Reserve Bank considers various factors such as the size and nature of business of different deposit takers.
The Reserve Bank is consulting on its proposed proportionality framework before finalising it by March 2024.
What are Depositor Compensation Scheme Levies?
The legislation introduces a new Depositor Compensation Scheme so depositors can have confidence that their deposits, in the event of a deposit taker failure, are eligible for compensation up to $100,000 per depositor, per institution.
This Depositor Compensation Scheme will be funded by an industry levy set by the Minister of Finance and will be prioritised ahead of the rest of the legislation coming into effect, with the Scheme intended to commence by late 2024.
The consultation documents and details on how to make a submission, from 31 July 2023 until 25 September 2023, are available here:
- Deposit Takers Act 2023 - Proportionality Framework Consultation
- Depositor Compensation Scheme Development of Regulations
- Statement of Funding Approach - Funding Strategy for the Depositor Compensation Scheme | The Treasury New Zealand