The Non-bank Deposit Takers Bill (the Bill) has been introduced to Parliament this month. The Bill forms part of the Government's plan to increase investor confidence in financial institutions following the various finance company collapses. Non-bank deposit takers (NBDTs) include persons who offer debt securities to the public, carry on the business of borrowing and lending money or provide financial services, subject to certain exceptions (such as registered banks and local authorities, which are excluded).
The key new components of the Bill are as follows:
- The requirement for an NBDT to be licensed by the Reserve Bank of New Zealand
- The obligation of NBDTs to provide suitability certificates for directors and senior officers (and to notify the Reserve Bank of any suitability concerns they have for directors or senior officers)
- Restrictions upon change in ownership of NBDTs (Reserve Bank consent must be sought where a person is acquiring 20% or more of an NBDT's voting securities, or the ability to appoint 25% or more of the NBDT's governing body)
- The strengthening of the Reserve Bank's powers including the ability to seek information from NBDTs, associated persons and trustees, to remove or appoint directors of an insolvent or failing NBDT and, in certain circumstances (such as NBDT distress or failure), to give binding directions in relation to NBDTs, associated persons or trustees, or cancel an NBDT's licence. These are similar to the powers able to be exercised by the Reserve Bank in relation to registered banks.
The Bill is expected to come into effect on 1 June 2012, other than the licensing obligation which will be postponed for a further year. It represents the final stage of proposed regulation for NBDTs. The existing regulations in Part 5D of the Reserve Bank of New Zealand Act 1989 relating to governance, risk management, credit ratings, minimum capital requirements, capital ratio requirements, related party exposures and liquidity will continue to apply to NBDTs (and are incorporated, with minor amendment, in the Bill). Trustees will continue to have primary responsibility for the supervision of NBDTs and the Financial Markets Authority will have responsibility for enforcing NBDTs' disclosure requirements.
The Bill passed its first reading on 10 August 2011 and has been referred to the Finance and Expenditure Select Committee for consideration.