RBNZ moves on non-bank regulation

The Reserve Bank of New Zealand is putting further moves to regulate non-bank deposit takers out for discussion.

The Government moved in 2007 to regulate non-bank deposit takers (NBDTs) after a number of finance companies collapsed. The regime is being implemented in two stages. The first stage included credit rating and prudential requirements and beefing up the central bank's powers.

A consultation paper yesterday progresses the second stage, including licensing, fit and proper requirements for directors and senior officers, and distress and failure management powers for the Reserve Bank.

"Although the full regime has been consulted on, we think it is important to consult on these features again," the bank said.

"The regulatory regime has been developed to overcome gaps in the existing regulation of NBDTs, including the absence of minimum entry requirements, and inconsistency in governance and prudential requirements across the sector."

In future licensed NBDTs will be required to meet minimum prudential requirements.

Fit and proper requirements also attempt to ensure those who run NBDTs have the necessary qualifications and integrity.

Directors and senior office holders will be subject to fit and proper checks but the onus on ensuring they are fit and proper to perform their duties rests primarily with shareholders and directors. The central bank will have a secondary role.

If "trigger" criteria are breached the directors will be unable to certify that the person is fit and proper, and must not proceed with the appointment until they have confirmed the bank does not object. The "trigger" includes criminal offending, conflicts of interest and bankruptcy.

The ownership and organisational structure of NBDTs should be transparent and easily verifiable, the consultation paper said.

- NZPA