What is crisis management?
Crisis management is the actions taken by deposit takers, the Reserve Bank and other stakeholders to avoid significant damage to the financial system. It includes both recovery and resolution.
Why do we need crisis management?
If a deposit taker gets into distress or fails, an effective crisis management regime is essential for minimising the serious economic damage and costs that can result, as we saw in the global financial crisis. These regimes also support a competitive and dynamic financial system, where deposit takers can enter and exit efficiently.
Our crisis management sits within our broader regulatory and supervisory framework for deposit takers. The following diagram shows our staged responses to address financial distress or other difficulties.
How crisis management fits into our prudential framework
Increasing severity of stress
The first and second box show how we mitigate the probability of distress
First box: Normal supervision
Second box: Early detection and diagnosis
The third and forth box show how we manage the impact of distress when it arises
Third level: Recovery - Measures undertaken by the deposit taker to restore its financial viability
Fourth box: Resolution - Regulatory intervention to deal with the failure of an entity in an orderly manner
Fundamental shift in crisis management
To avoid significant damage to the financial system resulting from a distressed deposit taker, the DTA enhances New Zealand’s crisis management regime in line with international best practice.
The DTA modernises New Zealand’s crisis management framework by formalising our role as the resolution authority, establishing a Depositor Compensation Scheme (DCS) and providing an additional suite of powers and tools to deal with entities in distress.
In 2024, we published an issues paper on a range of policy issues related to operationalising the new crisis management regime in the DTA. We are considering our response to the submissions received as we develop relevant policies.
In 2026, we plan to consult on policy for a Crisis Preparedness Standard. We will also publish a Statement of Approach to Resolution (refer to the indicative timeline below).
As part of the 2025 review of key capital settings, we are considering the interrelationship between capital and the crisis management framework, including the balance between going concern and gone concern capital and the appropriateness of any Total Loss Absorbing Capacity (TLAC) requirements. We will complete this review by the end of 2025.
- Read more about the Issues Paper on Crisis Management under the DTA, including the consultation submissions.
- Read more about the 2025 Review of key capital settings, including the Terms of Reference.
Indicative crisis management timeline
Indicative crisis management timeline
First box 2024 Consult on Issues Paper (Aug - Nov)
Second box 2026 Consult on policy for Crisis Preparedness Standard
Third box 2027 Consult on exposure draft of Crisis Preparedness Standard
Fourth box 2028 -2029 Issues Crisis Preparedness Standard, and publish Statement of Approach to Resolution (SoAR)
2026 - ongoing Develop and maintain Resolution Plans for each deposit taker