The Non-bank Deposit Takers Act 2013 (the Act) has been passed by Parliament, and is expected to come into force in May 2014.

The Act implements a new licensing regime for Non-bank Deposit Takers (NBDTs) to be overseen by the Reserve Bank of New Zealand. NBDTs include finance companies, building societies and credit unions. The Act aims to reduce the risk of a NBDT failing, and to prevent damage to the financial system in the event of a failure.

Prudential requirements currently in force for NBDTs include credit ratings, governance, risk management, capital, related party exposure limits, and liquidity. These requirements will substantially remain the same. However, the Act introduces suitability assessments of directors and senior officers of NBDTs, and restrictions on changes of ownership of NBDTs. Furthermore, the Act gives the Reserve Bank the power to detect imminent failures, and intervene if required.

Once the Act is in force, existing NBDTs will have 12 months to comply with licensing requirements.

The media release can be found at: http://www.rbnz.govt.nz/news/2013/5540034.html