RBNZ gives trustees four years to sharpen role

Finance company trustees have four years to prove their worth under the Reserve Bank's new regulatory regime for the sector.

Reserve Bank head of prudential supervision Toby Fiennes told a business audience in Auckland yesterday that the bank was developing regulations which would give effect to last year's Reserve Bank Amendment Act.

Under the act, the RBNZ assumes the role of prudential regulator for finance companies and other non-bank deposit effective from later this year and early next year. The new regime will see trustees remain the frontline supervisors for finance companies, but they will report to the Reserve Bank.

"This will require trustees to be proactive, focused and assertive with their supervisory role," said Fiennes who also pointed out the act required the RBNZ "to review the non-bank deposit taker regime, including the role of trustees within four years".

Trustees' record as the finance company sector's frontline regulators has been under intense scrutiny following a critical Companies Office report on the string of failures.

Before that, it emerged that Mascot Finance was granted cover under the Government's retail deposit guarantee based on information regarding its financial health provided by its trustee to the Reserve Bank and then Treasury. It failed shortly afterward.

Fiennes also emphasised the need for finance companies to seek a credit rating before it becomes mandatory next March to avoid the risk of being unable to obtain one in time.