Proposed Deposit Takers Act
The proposed Deposit Takers Act will protect deposits and increase the stability of our financial system.
The two key programmes the Act will enable are:
- the creation of a Depositor Compensation Scheme — to protect deposits held in banks and non-banks
- strengthening the supervisory and enforcement powers of the Reserve Bank to allow us to act before deposit takers are in trouble.
Depositor Compensation Scheme
The proposed Depositor Compensation Scheme will allow consumers to have confidence that their deposited funds are safe in the event of an entity failing, up to a total of $100,000 per depositor, per institution.
Strengthening of the Reserve Bank’s powers
The strengthening of the Reserve Bank’s supervision and enforcement powers will enable action before any entity is under inappropriate stress or at risk of failure. The Act will:
- Provide additional powers including new requirements for directors, more inspection powers and an improved penalty framework.
- Create a single regulatory regime for all entities who hold deposits — for example, banks and credit unions to enable robust monitoring of all deposit takers to ensure consumers are protected.
- Provide the framework for managing and resolving any deposit taker in financial distress.
The Deposit Takers Bill was introduced to Parliament on 22 September 2022. It is expected to come into force as law after receiving Royal Assent in mid-to-late 2023.
You can find the bill on the New Zealand legislation website.
After the Act comes into force, there will be a transition period to allow both the Reserve Bank and regulated entities time to adapt to the new regime. A significant work programme over several years will be required to implement the new prudential framework for deposit takers.
Further public consultation is expected on the funding framework, which includes industry levies, before the Depositor Compensation Scheme is implemented.
Introducing the new measures
While we anticipate the Bill will pass into law in mid-to-late 2023, a substantial work programme is needed to implement the new prudential framework for deposit takers. It will take some years for the Reserve Bank to develop and consult on the secondary legislation that will implement the regulatory requirements for the new regime, and complete a licensing process for deposit takers to operate under the regime. The parts of the current Reserve Bank Act relating to the regulation and supervision of registered banks and the Non-bank Deposit Takers Act 2013 will remain in force until the remaining parts of the DTA have been fully implemented.
The Depositor Compensation Scheme is being prioritised ahead of the rest of the Act coming into effect and is expected to be up and running in early 2024.
During the Review of the Reserve Bank, three rounds of consultation took place and in December 2021 we released an exposure draft of the proposed Deposit Takers Bill for public consultation. The exposure draft was a preview of the Bill, enabling anyone with a view to submit feedback before we provided final advice to the Minister and develop the Bill to be introduced to Parliament. The consultation closed on 21 February 2022.
As well as releasing the exposure draft of the proposed Bill, we prepared a commentary document to provide a high level summary of the exposure draft and identify areas where we were seeking further input.
Explanatory notes of the Exposure Draft (PDF 734KB)
Background to the proposed Deposit Takers Act
The proposed Deposit Takers Act is the final piece of legislation arising from the Review of the Reserve Bank, which started in 2017. Minister of Finance Hon Grant Robertson initiated the Review to modernise New Zealand’s monetary and financial stability policy frameworks and the Reserve Bank’s governance and accountability settings.
The first actions as a result of the Review updated the monetary policy framework, when “Supporting maximum sustainable employment” was added to the economic objectives for the Reserve Bank and a Monetary Policy Committee (MPC) was created with responsibility for formulating monetary policy. This was enacted in 2018 by the Reserve Bank of New Zealand (Monetary Policy) Amendment Act.
The second tranche of work updated the Reserve Bank’s institutional arrangements, when the Reserve Bank of New Zealand Act 2021 passed into law in August 2021. Our previous legislation, the Reserve Bank of New Zealand Act 1989, was more than 30 years old. The new Act aims to modernise how we operate and are governed. It increases our accountability and transparency, and brings us closer to what is required of Crown entities in terms of decision-making, reporting and external monitoring.
A joint Review team (Reserve Bank and Treasury) worked on the Review of the Reserve Bank, and led development of the Deposit Takers workstream until May 2021. More recently the project has been led by the Reserve Bank, but with the Treasury remaining involved.
Proactive releases — June 2022 or earlier
|Reserve Bank Act Review — Deposit Takers Bill||Cabinet Paper|
|Regulatory Impact Statement: Deposit Takers Bill||October 2021||Supplementary decisions|
|Minutes of Decision: Cabinet Economic Development Committee||October 2021||Cabinet Minute|
|Minute of Decision: Cabinet CAB-21-MIN-0429||October 2021||Cabinet Minute|
|Joint report to the Minister of Finance: Cabinet Paper and Technical Decisions Related to the Deposit Takers Bill||September 2021||Cabinet Paper|
|Joint report to the Minister of Finance: Technical Decisions Related to the Deposit Takers Bill||November 2021||Technical Decisions|
|Response to OIA21-057 Reserve Bank Reports 5831 and 5832, joint Treasury/Reserve Bank report||September 2021||OIA response|
Individual submissions on the exposure draft — 22 September 2022
|Name of submitter||Date|
|Te Tumu Paeora — Office of the Māori trustee||February 2022|
|Chapman Tripp||March 2022|
|Australian Securitisation Forum||February 2022|
|CUBS New Zealand||March 2022|
|CUBS New Zealand||February 2022|
|RBNZ Regulated Fincos||February 2022|
|ASB Bank Limited||February 2022|
|Finance Direct Limited
|Financial Services Federation||February 2022|
|General Finance Ltd
|International Capital Market Association (ICMA)||February 2022|
|International Swaps and Derivatives Association (ISDA)||February 2022|
|XCEDA Finance||March 2022|
|New Zealand Local Government Funding Agency Limited (LGFA)|
|McGrathNicol Limited||February 2022|
|Non bank deposit takers initial submission|
|Non bank deposit takers full submission|
|New Zealand Taxpayers’ Union||February 2021|
|New Zealand Bankers’ Association (NZBA)||February 2022|
|Russell McVeagh||February 2022|
|Trustee Corporations Association of New Zealand Inc (TCA)||February 2022|