Reserve Bank Bill gains momentum

On 21 November 2007, the Government introduced the Reserve Bank of New Zealand Amendment Bill (No 3) 2007 (the Bill). The Bill is designed to implement elements of a new regulatory framework for non-bank deposit takers by amending provisions of the Reserve Bank of New Zealand Act 1989 (Act).

The Bill was reported back to parliament on 4 July 2007 (the Report).

Executive summary

The Report introduces timeframes for compliance with the proposed regime. Areas of reform, such as deposit takers’ mandatory credit ratings, will require compliance by 1 March 2010, while risk management programmes for deposit takers will be required to be in place by September 2009.

The Report is silent on timeframes for other requirements, such as minimum capital level and capital ratio requirements and minimum liquidity requirements. It is proposed that these areas will be governed by regulations. There has been no indication of the likely timeframe for such regulations.

Capital and liquidity requirements will result in the need to amend the existing trust deeds of deposit takers, or for new deposit takers, incorporation of such requirements into new trust deeds. For many existing deposit takers, this will result in an extensive review of their constitutional documents.

It is expected that the amended Bill will come into force before the election.