Reserve Bank policy positions

It will often be straightforward to determine whether an entity meets the definition of a non-bank deposit taker (NBDT) for the purposes of the Non-bank Deposit Takers Act 2013 (the Act). However, there may be situations where the law is not so clear-cut. In this regard, the Reserve Bank has issued guidance outlining the approach it generally takes in identifying whether or not an entity (or class of entities) meets the definition of ‘deposit taker'. Policy guidance on specific categories of entities is detailed in the table below. The table will be updated from time to time to reflect any development or change in the Reserve Bank's policy stance.

The Reserve Bank wishes to emphasise that it is a matter for an entity to seek its own legal advice on the application and operation of the law, and it is the court that is ultimately the final arbiter when it comes to this. Moreover, this table illustrates the Reserve Bank's general policy position, although any application for an exemption will be considered on a case-by-case basis.

Category

RBNZ policy positions (last updated October 2011)

Corporate issuers

Corporate issuers such as manufacturing companies or utility providers that issue bonds, debentures or other debt securities and that carry on non-financial business are generally not considered by the Reserve Bank to be deposit takers.

Funding conduits

A genuine funding conduit may be exempted subject to conditions (upon application to the Reserve Bank) from related party, governance, risk management, liquidity and minimum capital ratio requirements, but not the credit rating requirement. To be eligible for these exemptions, a funding conduit is expected to have all of the following attributes:

  • it is a wholly owned subsidiary;
  • its primary purpose is to on-lend all (or at least 95 percent) of the funds raised to its parent or group; and
  • its debt securities are unconditionally guaranteed by its parent.

The Reserve Bank may also have regard to the following matters in connection with an exemption application:

  • any listing, or proposed listing, of securities by a member of the group on a recognised exchange and/or the standing of the group across its business activities; and
  • the nature of any borrowing and lending, or the provision of financial services, elsewhere in the group.

Payment facility providers

A genuine payment facility provider may be exempted subject to conditions (upon application to the Reserve Bank) from all the NBDT requirements.

In order to be eligible for an exemption, a payment facility provider is expected to have all of the following attributes:

  • it does not provide any other financial service in New Zealand other than that of a payment facility; and
  • its payment facility:
    • is a call security; i.e., the balance is repayable on demand;
    • is not interest bearing or does not generate any consideration in the nature of interest; and
    • does not form part of another financial product; e.g., the facility cannot be used by the holder to obtain credit.

This exemption is effected through the Deposit Takers (Payment Facility Providers) Exemption Notice 2009, which commenced on 16 October 2009. Payment facility providers are required to be approved by the Reserve Bank before they can rely on the exemption.

Entities exempted under the Securities Act 1978

The following provisions of the Act require NBDTs to meet regulatory requirements that are imposed through trust deeds:

  • section 157P, which relates to minimum capital;
  • section 157S, which relates to a capital ratio latter;
  • section 157V, which relates to a maximum limit on exposures to related parties; and
  • section 157Z, which relates to liquidity requirements.

These sections apply to all NBDTs notwithstanding that they are exempt from having a trust deed for the purposes of the Securities Act. NBDTs that fall within this category must either:

  • adopt a trust deed in a manner that complies with both the Securities Act and the Act; or
  • apply to the Reserve Bank for an exemption from those sections listed above.

Overseas issuers

Overseas NBDTs operating in New Zealand are subject to New Zealand law and are required to comply with the prudential requirements of Part 5D.

Australian NBDTs operating in New Zealand under the Mutual Recognition of Securities Offerings regime may be exempted from the Part 5D requirements relating to a New Zealand trustee and trust deed if:

  • the nature of the supervision exercised by the Australian trustee is comparable to that of a New Zealand trustee under Part 5D; and
  • appropriate arrangements are in place for the Australian trustee to undertake the responsibilities as are imposed on a New Zealand trustee under Part 5D; e.g., those arising under sections 157ZE – 157ZG.

Certain Building Societies and Credit Unions

Building societies and credit unions may be deemed not to be deposit takers if the entity:

  • does not offer debt, or debt-like participatory securities to the public in New Zealand; and
  • does not have any of these types of securities outstanding.

For an entity to be deemed not to be a deposit taker, the entity must be named in the Deposit Takers (Persons Declared Not to be Deposit Takers) Regulations 2011. The Reserve Bank can add or remove entities from these regulations.

Trustee companies are responsible for supervising NBDTs' compliance with the prudential regulations established by the Reserve Bank.