KEY POINTS:
Finance companies, building societies, credit unions and other deposit-takers will have to obtain credit ratings and meet tougher prudential requirements as a result of legislation passed yesterday.
The Reserve Bank Amendment Bill (No 3), extending the Reserve Bank's responsibilities to become the regulator of non-bank deposit takers, passed into law as Parliament sat under urgency.
Finance Minister Michael Cullen said the law was a result of a two-year review and would take time to implement.
Many investors are struggling with the collapse of finance companies involving millions of dollars and thousands of people.
"This is not intended to be a quick-fix response to current challenges facing the non-bank sector. The new legislation is intended to raise standards across the industry and to improve the future resilience of the sector," Dr Cullen said.
Reserve Bank Governor Alan Bollard said the law was a significant step to improve the resilience of the sector.
"Trustees will continue to be front-line supervisors of deposit-takers, and we look forward to working proactively with trustees as they work towards a more enduring role in the sector."
He said the Reserve Bank would develop regulations for the sector over the next two years that would introduce consistent standards in key areas.
Dr Cullen said the requirements of the law included:
* A credit rating from a rating agency approved by the Reserve Bank.
* Maintaining a minimum amount of capital and a minimum capital ratio.
* Maintaining an adequate level of liquid assets.
* Restrictions on lending to persons related to the deposit-takers.
* New governance requirements, including at least two independent directors.
* All deposit-takers are required to obtain a credit rating by March 2010.
Dr Cullen said there was nothing to stop deposit-takers obtaining a credit rating now, and it might be "a desirable course of action".
- NZPA
