New regulatory initiatives

 Please note some of the statutory references on this page may be out of date and are currently being updated.

Last updated: 18 December 2015

Initiatives currently under development

Initiative

Description

Timing

Regulatory Stocktake

The Bank has now published the conclusions of its Regulatory Stocktake (PDF 59KB), which was a review of the prudential requirements applying to registered banks and licensed NBDTs. Although this concludes the Stocktake itself, it also marks the beginning of several strands of follow-on implementation work.

More information on the Regulatory Stocktake.

Follow-on implementation work in 2016

Review of the credit rating exemption threshold for non-bank deposit takers

In late 2014, the Bank published a consultation document on options for possible changes to the threshold for qualifying for an exemption from the credit rating requirement (PDF 194KB). The Bank received three submissions on this consultation and reached a conclusion on this issue earlier this year. The Bank has decided to increase the credit rating exemption threshold from $20 million to $40 million, with a requirement for entities under $20 million to maintain a capital ratio of at least 10%, and entities between $20 million and $40 million to maintain a capital ratio of at least 12%.

The Bank will be implementing this change prior to 1 March 2016.

Recently implemented initiatives

Initiative

Description

Timing

Regulations declaring certain entities not to be NBDTs

Cabinet has recently agreed to make regulations declaring certain entities not to be NBDTs for the purposes of the Non-bank Deposit Takers Act 2013. The Cabinet paper (PDF 105KB) and Regulatory Impact Statement (RIS) (PDF 96KB) are now available.

19 June 2014

Changes to the treatment of charitable and religious organisations under the Non-bank Deposit Takers regime

The Reserve Bank has recently completed a review of the treatment of charitable and religious organisations under the non-bank deposit takers regime. As a result, the Bank proposes to exclude from the regime smaller charitable and religious organisations and provide larger organisations of this type with a transitional period to comply with specified aspects of the regime.

1 December 2013

Review of the Prudential Regime for Non-bank Deposit Takers – Final Report

The Reserve Bank recently completed a review of the operation of the prudential regime for Non-bank Deposit Takers, as required under section 157ZZ of the Reserve Bank of New Zealand Act 1989. A report on the outcomes of the review (PDF 549KB) was provided to the Minister of Finance, and has been presented to the House of Representatives. The report concludes that the regime has largely achieved its intended objectives, but there are a number of technical changes that would help it operate more efficiently in future.

2 October 2013

Review of the treatment of charitable and religious organisations under the Non-bank Deposit Takers regime

A document seeking stakeholder feedback (PDF 149KB) on a proposal to declare small charitable and religious organisations out of the definition of Non-bank Deposit Taker.

20 August 2013

Review of the Prudential Regime for Non-bank Deposit Takers – consultation document

A document seeking stakeholder feedback (PDF 384KB) on the operation to date of the prudential regime for non-bank deposit takers, and on a number of potential changes to the regime the Reserve Bank is considering.

17 May 2013

Non-Bank Deposit Takers Bill

A bill extending the powers of the Reserve Bank in relation to the prudential regulation of NBDTs. The Minister of Finance issued a press release announcing the August introduction to the House of the Non-Bank Deposit Takers Bill (PDF 350KB).

2 August 2011

Future policy work

Initiative

Description

Timing

Consideration of NBDT Capital Requirements

Consideration of NBDT capital requirements will follow from the planned review of capital requirements for banks. The bank capital review will take note of changes to international capital adequacy standards. These are currently being worked through by the Basel Committee for Banking Supervision (BCBS), who we expect will finalise proposals over the course of 2016. Changes to the credit risk standard for standardised banks are likely to be particularly relevant for NBDTs, although the Reserve Bank will continue to tailor the NBDT capital requirements to the particular characteristics of the New Zealand sector.

2016-17

Update on the Regulatory Stocktake

The Bank has now published the conclusions of its Regulatory Stocktake (PDF 59KB), a review of the prudential requirements applying to registered banks and licensed NBDTs. Earlier in the year, the Bank had published an Industry Update on NBDT-related matters that have been raised as part of the stocktake. More information on the Regulatory Stocktake.

Review of the credit rating exemption threshold for non-bank deposit takers

NBDTs are exempt from the requirement to have a credit rating when they:

  • Are part of a borrowing group with consolidated liabilities of less that $20 million; or
  • Are not part of a borrowing group, and have consolidated liabilities of under $20 million.

The Reserve Bank has recently published a consultation document seeking feedback on options for possible changes to this $20 million threshold. These options include a small increase in the exemption threshold (perhaps to $25 million) or a larger increase in the exemption threshold (perhaps to $30-$40 million), with a requirement for exempt entities to maintain a higher capital ratio (perhaps 12% rather than 10%).

Regulations declaring certain entities not to be NBDTs

Cabinet has recently agreed to make regulations declaring the following types of entities not to be NBDTs in specified circumstances for the purposes of the Non-bank Deposit Takers Act 2013:

  • Intergroup funding vehicles;
  • Payment facility providers;
  • Small charities that act as NBDTs; and
  • Special purpose vehicles established by registered banks for the purpose of raising regulatory capital.

The Cabinet paper (PDF 105KB) and Regulatory Impact Statement (RIS) (PDF 96KB) are now available.

Changes to the treatment of charitable and religious organisations under the NBDT regime

The Deposit Takers (Charitable and Religious Organisations) Exemption Notice 2010 (the current notice) currently exempts charitable and religious organisations from having to comply with all of the requirements of the NBDT regime, except the requirement to have a risk management programme.

Entities are generally eligible to use the exemptions in the current notice where they are also eligible to use the exemptions from securities law requirements promulgated by the Financial Markets Authority (from 1 December 2013 these exemptions will be found in the Securities Act (Charities Debt Securities) Exemption Notice 2013).

The Reserve Bank has recently completed a review of the treatment of charitable and religious organisations under the NBDT regime. The review has been carried out in parallel with a review of the current Securities Act exemptions undertaken by the FMA.

As a result of this review, the Reserve Bank has adopted the following approach to the treatment of charitable and religious organisations.

Treatment of charitable and religious organisations until 28 February 2014

  • From 1 December 2013 to 28 February 2014, the existing exemptions will continue to be available to charitable and religious organisations covered by the Securities Act exemptions promulgated by the FMA;

Treatment of smaller charitable and religious organisations from 1 March 2014

  • From 1 March 2014, registered charities will be exempted from the requirements of the regime where they have:
    • Outstanding debt securities offered to the public of under $15 million; or
    • Outstanding debt securities offered to the public of over $15 million, but outstanding loans of under $5 million.
  • Certain types of loans will not need to be taken into account when determining the whether a charitable or religious organisation has loans of under $5 million. Specifically:
    • Loans to other entities that own or control the charitable or religious organisation; or
    • Loans to entities which are owned or controlled by the same entity that owns or controls the charitable or religious organisation.

Treatment of larger charitable and religious organisations from 1 March 2014

  • Registered charities above these thresholds will have until the date by which all NBDTs are required to be licenced under the Non-bank Deposit Takers Act 2013 to:
    • Move to compliance with the governance, credit rating and risk management requirements of the regime; and
    • Be licensed under the Non-bank Deposit Takers Act 2013;
  • It is expected that all NBDTs will be required to be licenced under the Non-bank Deposit Takers Act 2013 by 1 May 2015 (this date will be confirmed before the end of February 2014);
  • A decision will be made on the application of capital ratio, liquidity and related party exposure requirements to these entities at a later date, once the treatment of charitable and religious organisations under the new Financial Markets Conduct Act 2013 has been determined.

Any large charitable or religious organisation that considers it will have difficulty complying with this approach without significant risk to its ability to repay its outstanding debt securities should contact the Reserve Bank to discuss whether other options may be available.

Review of the prudential regime for Non-bank Deposit Takers: Final report

Section 157ZZ of the Reserve Bank of New Zealand Act 1989 requires the Reserve Bank to carry out a review of the operation of the prudential regime for Non-bank Deposit Takers (NBDTs), and prepare a report on the review for the Minister of Finance, by 9 September 2013. The Minister of Finance has recently tabled the report on the review (PDF 549KB) in the House of Representatives.

The report concludes that the regime has helped to ensure the soundness of the NBDT sector, and through that outcome, helped to promote the maintenance of a sound and efficient financial system. However it also proposes a number of legislative amendments designed to ensure that the regime operates more efficiently in the future. These amendments include:

  • Better tailoring the definition of NBDT to entities genuinely carrying on NBDT type business;
  • Some technical changes to the existing model whereby trustees act as frontline supervisors of NBDTs, with the aim of improving role clarity and enhancing the ability to respond promptly and effectively in a crisis;
  • Providing greater flexibility in the setting of prudential standards; and
  • Providing a more graduated spectrum of remedies for addressing breaches of legal requirements by NBDTs.

Read the summary of submissions (PDF 69KB) on the discussion document released as part of the review.

Consultation Document: Review of the treatment of charitable and religious organisations under the Non-bank Deposit Takers regime

The Deposit Takers (Charitable and Religious Organisations) Exemption Notice 2010 currently exempts charitable and religious organisations from most of the requirements of the NBDT regime. However, this notice is due to expire on 30 November 2013. As a result, the Reserve Bank is reviewing the treatment of charitable and religious organisations under the NBDT regime. This review is being undertaken in conjunction with a review of the treatment of charitable and religious organisations under the Securities Act 1978, which is being carried out by the Financial Markets Authority (FMA).

As part of this process the Reserve Bank has prepared a discussion document (PDF 149KB) seeking feedback on a proposal to declare small charitable and religious organisations out of the NBDT regime, and require larger charitable and religious organisations that meet the definition of NBDT to shift to compliance with the full NBDT regime over a transitional period. The FMA has also released a discussion document on the treatment of charitable and religious organisations under the Securities Act 1978.

Consultation Document: Review of the Prudential Regime for Non-bank Deposit Takers

Section 157ZZ of the Reserve Bank of New Zealand Act 1989 and clause 86 of the Non-bank Deposit Takers Bill require the Reserve Bank to carry out a review of the operation of the prudential regime for non-bank deposit takers, and to prepare a report on this review for the Minister of Finance before 9 September 2013.

As part of this review process, the Reserve Bank has prepared a discussion document entitled Review of the Prudential Regime for Non-bank Deposit Takers (PDF 384KB). The document aims to seek stakeholder feedback on the operation of the prudential regime to date, and on a number of potential changes to the regime the Reserve Bank is considering.

Submissions closed on 17 May 2013.

Development of a second Bill for the NBDT sector

Following recent approval by Cabinet in June 2011, the Reserve Bank has released a Cabinet Paper (PDF 179KB) which confirms policy positions relating to the matters discussed in the Reserve Bank's October 2010 consultation paper.

In October 2010 the Reserve Bank released a consultation paper on policy proposals for a second bill for the regulation of NBDTs (PDF 148KB) (following the passing of the Reserve Bank of New Zealand Amendment Act in 2008). This consultation document included proposals for all NBDTs to be licensed by the Reserve Bank, together with fit and proper person requirements for directors and senior office holders, and controls on changes of ownership of NBDTs. They also included a framework for dealing with NBDT distress and failure, and some technical changes to aspects of the regime already enacted.

In April 2012 the Reserve Bank released a consultation paper on proposals for regulations under the second bill (the Non-bank Deposit Takers Bill 2011) (PDF 90KB). One set of regulations is to declare the shares of building societies, that are in-substance the same as debt securities, to be debt securities for the purposes of the NBDT regime. The other set is to prescribe suitability concerns for the purposes of the new law.