The Government has caved in to industry opposition to tough new consumer protection rules for finance companies, building societies and credit unions and is looking for softer regulatory options.
Commerce Minister Lianne Dalziel this week released summaries of submissions received on the Government's reviews of financial products andproviders and intermediaries. While there was a "clear thread" of support for most of the proposals published last year, plans for a two-tier regulatory model for non-bank organisations were "more contentious".
"In that light, officials are now evaluating alternative options."
Under the two-tier model, finance companies, building societies and credit unions could have opted to become "authorised deposit takers". As such, they would have been licensed, had a minimum credit rating and would have faced increased governance and disclosure obligations. They would also have been obliged to maintain minimum cash reserves under the supervision of the Reserve Bank.
Dalziel said the Government had "received quite a negative response" to the proposal and was going back to the drawing board. Submitters had expressed general satisfaction with the oversight provided by trustee companies but had also raised concerns the title "approved deposit taker" might mislead investors as to the soundness of financial institutions.
Work was continuing as to where the responsibility for prudential supervision should lie. The Government had planned to deal with finance industry regulation including that for intermediaries, products and providers in one bill but now intended to legislate for the registration of service providers and dispute resolution separately.
Legislation dealing with trust deed requirements for finance companies and other non-bank financial institutions as well as insurance and fund management would follow, probably next year.
