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Covenant Trustee Company Limited

The Reserve Bank is reminding the trustee industry of its obligations under Part 5D of the Reserve Bank of New Zealand Act 1989 (“the Act”) after sending a warning to Covenant Trustee Company Limited (“Covenant”) for failing to promptly notify the Reserve Bank of a deposit taker’s material non-compliance with the independent director requirements under Part 5D of the Act, as required under section 157ZF of the Act. The deposit taker was NZF Money Limited, which was subsequently placed into receivership when it was unable to pay its debt obligations when they fell due.

The trustee industry needs to be aware, as the front line supervisors of non-bank deposit takers (NBDTs), of the importance of complying with the obligation to notify the Reserve Bank when NBDTs fail to comply in a material sense with the prudential requirements imposed by Part 5D of the Act (or are likely to do so). Failure to promptly notify the Reserve Bank is viewed seriously and inhibits the ability of the Reserve Bank to take timely and responsive action to address non-compliance in the sector.

Covenant acknowledged its mistake in its late notification and has committed to take remedial measures to prevent similar issues in future. The Reserve Bank has warned Covenant that future non-compliance with trustee obligations under Part 5D is likely to result in formal enforcement action being taken.