Keeping Kiwis’ money safe and ensuring they have confidence in the people running our banks are the focus of the latest decisions out of the Government’s review of banking laws.
Finance Minister Grant Robertson today announced the latest Cabinet decisions from Phase 2 of the Review of the Reserve Bank Act. They include:
- Greater powers to monitor banks and hold directors and executives more accountable for their actions.
- Introducing deposit insurance of $50,000 per institution. More than 90% of depositors will likely be fully covered, with many of the others having most of their deposits covered – consistent with international best practice.
- A Governance Board to oversee financial stability matters.
- A Financial Policy Remit will set out matters the Board must have regard to when pursuing the Reserve Bank’s financial stability objectives.
- Measures to increase transparency at the Reserve Bank, including more oversight for the Auditor-General and the Ombudsman.
“New Zealand has a strong and stable banking system, but it is regulated by laws that are 30 years old. We’re making sure they’re up-to-date,” Grant Robertson said.
The Government’s proposed changes incorporate lessons from the Australian Royal Commission into banking. This includes an in-principle decision to follow recent reforms in Australia to strengthen director and executive accountability, following the recommendations in the Hayne report.
“It’s important that Kiwis have confidence in the people running our banks and know the consequences they’ll face. We’ve seen examples of how confidence was shaken overseas and we’re acting to make sure New Zealand has a world-leading accountability regime.”
Cabinet has also confirmed a deposit insurance scheme limit of $50,000 per institution, following consultation on a range of $30,000-$50,000.
The scheme will fall under a new Deposit Takers Act which will govern the Reserve Bank’s regulatory powers. A separate Institutional Act will outline how the Reserve Bank is governed and how it operates. Splitting the Acts allows all deposit-takers to be regulated under a single flexible framework, providing a more consistent approach to the regulation of the sector.
It is intended for the Institutional Act to be introduced in mid-2020. Cabinet plans to make final policy decisions on the Deposit Takers Act and the deposit insurance scheme in mid-2020 following further consultation.