Deposit Takers Bill
The departmental disclosure statement for a government Bill seeks to bring together in one place a range of information to support and enhance the Parliamentary and public scrutiny of that Bill.
It identifies:
- the general policy intent of the Bill and other background policy material;
- some of the key quality assurance products and processes used to develop and test the content of the Bill;
- the presence of certain significant powers or features in the Bill that might be of particular Parliamentary or public interest and warrant an explanation.
This disclosure statement was prepared by the Reserve Bank of New Zealand.
The Reserve Bank of New Zealand certifies that, to the best of its knowledge and understanding, the information provided is complete and accurate at the date of finalisation below.
1 September 2022
Part One: General Policy Statement
The Deposit Takers Bill (the Bill) is an omnibus Bill introduced under Standing Order 267(1)(c). That Standing Order provides that an omnibus Bill to amend more than one Act may be introduced if the Business Committee has agreed to the Bill’s introduction as an omnibus Bill.
The Bill will modernise the Reserve Bank of New Zealand’s legislation for prudential regulation and supervision of the deposit-taking sector. The main purpose of the Bill is to promote the prosperity and well-being of New Zealanders and contribute to a productive and sustainable economy by protecting and promoting the stability of the financial system. The provisions in the Bill are intended to help protect society from the damage to New Zealand’s financial system and wider economy that could be caused by unexpected external factors, excessive risk taking by the deposit-taking sector, and the unmanaged failures of individual deposit takers.
In 2017, the Government announced a review of the Reserve Bank of New Zealand Act 1989 (the Review). Phase 1 of the Review dealt with monetary policy arrangements, resulting in the introduction of the Monetary Policy Committee and an economic objective of supporting maximum sustainable employment. Phase 2 of the Review, which began in June 2018, focused on the institutional structure of the Reserve Bank (the Bank), the framework for the prudential regulation and supervision of deposit takers, and new arrangements for depositor protection.
In August 2021, the Reserve Bank of New Zealand Act 2021 (the RBNZ Act 2021) was enacted as the first result of phase 2. The RBNZ Act 2021 is companion legislation to the Bill, focusing on the institutional foundations for the Bank’s prudential responsibilities and other functions. The RBNZ Act 2021—
- establishes a new governance model for prudential policy (a shift away from the single decision-maker in the form of the Governor to a board):
- strengthens accountability and transparency requirements (in line with the regime under the Crown Entities Act 2004):
- mandates a new financial policy objective focused on promoting financial stability:
- requires the Minister of Finance (the Minister) to issue a financial policy remit:
- formalises an external departmental monitor (in this case, the Treasury) to assess the Bank’s performance of its statutory functions:
- provides statutory recognition for the Council of Financial Regulators as a key forum for co-operation and co-ordination within New Zealand’s financial regulatory system.
The provisions of the Bill merge the currently separate frameworks for registered banks and licensed non-bank deposit takers under a single regulatory regime. Resetting the prudential boundary for deposit taking will require the Bank to update the broader framework for the regulation and supervision of entities that fall within this boundary.
Updates to the Bank’s prudential framework include modernising the licensing process, enabling a range of prudential standards to be applied to individual deposit takers or classes of deposit takers, and expanding the suite of supervisory and enforcement tools. The Bill introduces the Depositor Compensation Scheme (the DCS), a fund that will compensate eligible depositors up to $100,000. The DCS may also be used to compensate creditors or shareholders that may be made worse off as a result of a resolution action, relative to outcomes under liquidation.
The Bill, once it comes into force, will replace the Banking (Prudential Supervision) Act 1989 and the Non-bank Deposit Takers Act 2013.
Preliminary provisions
The main statutory purpose of the Bill is to promote the prosperity and well-being of New Zealanders and contribute to a sustainable and productive economy by protecting and promoting the stability of the financial system. To that end, other purposes of the Bill include—
- promoting the safety and soundness of deposit takers:
- promoting public confidence in the financial system:
- avoiding or mitigating adverse effects of risks involving the financial system.
The Bill includes a set of decision-making principles the Bank must take into account when performing or exercising its functions, powers, and duties. The principles are designed to guide the exercise of powers under the Bill, and to ensure that the Bank takes a range of factors into account when pursuing the statutory purposes. This includes ensuring that relevant considerations are taken into account (for example, proportionality considerations) and that longer-term risks are well managed.
Licensing
The Bill sets out requirements for the licensing of entities involved in the activity of borrowing and lending, conditions of a licence, and penalties that may result from non-compliance.
The Bank will primarily implement prudential policy through standards developed in consultation with the industry. Beyond standards, the Bank may impose conditions on licences. Licence conditions may apply particular prudential standards to firms (see the section below on regulation), and make other firm-specific restrictions on the business of a deposit-taker.
The Bill contains fit and proper requirements for directors and senior managers of deposit takers. It further outlines under what circumstances a deposit taker will need to obtain approval from the Bank for changes of control and other significant transactions, and when the Bank may cancel a licence.
Regulation
Prudential requirements for all licensed deposit takers will primarily be set out in standards issued by the Bank. Standards are secondary legislation under the Legislation Act 2019. The Bill outlines the scope of prudential standards the Bank may impose on deposit takers.
The Bill further outlines the due diligence duty of directors, requiring them to ensure that their deposit taker complies with its prudential obligations.
Supervision
The Bill details the Bank’s powers to gather information, undertake on-site inspections, investigate non-compliance with prudential obligations, and seek remedial action by the deposit taker.
Enforcement
The Bill provides a range of powers to sanction deposit takers for non-compliance. The penalty regime for contraventions in the Bill includes criminal offences, civil pecuniary penalty liability, and infringement offences. Enforcement provisions include the power to accept undertakings. The Bill further criminalises the making of false or misleading declarations or provision of false or misleading information.
Depositor Compensation Scheme
The Bill introduces the DCS, which provides each eligible depositor up to $100,000 for their covered deposits in New Zealand dollars at each deposit-taking institution. Natural persons and businesses are generally eligible depositors. However government agencies, some financial institutions, and associated persons or directors of licensed deposit takers, as defined in the Bill, are excluded. In general terms, compensation will be paid to eligible depositors by the DCS where a deposit taker is in financial or other difficulties that cause serious or prolonged disruption to the ability of eligible depositors to access their covered deposits. The Bill sets up a DCS fund by charging levies to licensed deposit takers. The fund is also backed up by public funds in case the balance of the DCS fund is insufficient to meet its obligations in a pay-out event. Under the Bill, the Bank has the role of collecting levies, managing the DCS fund, determining entitlements, and making compensation payments. The Bank can also use the DCS fund to support resolution measures when certain conditions are met.
Crisis management and resolution
The Bill provides the Bank with powers to address a deposit taker in financial distress, and to compensate creditors or shareholders that may be made worse off as a result of a resolution action relative to outcomes under liquidation.
Other provisions
The Bill restricts the use of certain words (for example, “bank” and “banking”) and provides for co-operation with Australian authorities.
Transitional arrangements and commencement
Most of the Bill will come into force on a date or dates specified by Orders in Council, but no later than 4 years after the date of Royal assent. This is necessary to give effect to the intended arrangements for implementing the Bill. The DCS is expected to come into force via an Order in Council at an earlier date than many other provisions in the Bill.
The following powers will come into force on the day after the date of the Royal assent:
- powers to issue standards (subpart 2 of Part 3):
- powers to make regulations (subpart 5 of Part 8).
A transitional period will then be used to license deposit takers and issue the relevant standards. At the end of that period, the remaining provisions of the Bill will come into force and the Banking (Prudential Supervision) Act 1989 and the Non-bank Deposit Takers Act 2013 will be repealed.
It is intended that the Bill will be divided by the select committee or at the committee of the whole House stage into separate Bills as follows:
- Parts 1 to 8 and Schedules 1 and 2 will become the Deposit Takers Bill:
- Part 9 and Schedule 3 will become the Deposit Takers (Repeals and Amendments) Bill.
Part Two: Background Material and Policy Information
Published reviews or evaluations
| 2.1. Are there any publicly available inquiry, review or evaluation reports that have informed, or are relevant to, the policy to be given effect by this Bill? | YES |
| Policy was developed by a team at the Reserve Bank of New Zealand and the Treasury. In developing the policy, the team produced a number of public consultation and issues papers. The most relevant papers are: Consultation 1: Safeguarding the future of our financial system: The role of the Reserve Bank and how it should be governed, 01/11/2018: https://www.treasury.govt.nz/sites/default/files/2019-03/rbnz-safeguarding-future-financial-system-c1.pdf Consultation Document 2A: In-principle decisions and follow-up questions on: The role of the Reserve Banks and how it should be governed, 24/06/2019: https://www.treasury.govt.nz/sites/default/files/2019-06/rbnz-safeguarding-future-financial-system-2a.pdf Consultation Document 2B: The Reserve Bank’s role in financial policy: tools, powers, and approach, 24/06/2019: https://www.treasury.govt.nz/sites/default/files/2019-06/rbnz-safeguarding-future-financial-system-2b.pdf Consultation Document 3: Further consultation on the prudential framework for deposit takers and depositor protection, 13/03/2020: https://www.treasury.govt.nz/sites/default/files/2020-03/rbnz-further-consultation-phase-2.pdf Exposure draft of the Deposit Takers Bill, 06/12/2021: Exposure draft of the Deposit Takers Bill (rbnz.govt.nz) Explanatory notes of the Exposure Draft, 06/12/2021: Deposit Takers Bill - Exposure Draft: Explanatory Notes (rbnz.govt.nz) Summary of Submissions, August 2022, published on the Reserve Bank website Other relevant papers and reports, as well as proactively released advice, is available on RBNZ and Treasury websites at: Reserve Bank: Proposed Deposit Takers Act - Reserve Bank of New Zealand (rbnz.govt.nz) The Treasury: https://www.treasury.govt.nz/news-and-events/reviews-consultation/reviewing-reserve-bank-act/deposit-takers-bill
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Relevant international treaties
| 2.2. Does this Bill seek to give effect to New Zealand action in relation to an international treaty? | NO |
Regulatory impact analysis
| 2.3. Were any regulatory impact statements provided to inform the policy decisions that led to this Bill? | YES |
| The regulatory impact assessments can be found and downloaded at: Regulatory Impact Statement Reserve Bank Act Review – Deposit Takers Act – Regulatory Impact Statement: A New Prudential Framework for the regulation and supervision of deposit takers and the introduction of deposit insurance, 07/04/2021: https://www.treasury.govt.nz/system/files/2021-04/rbnz-dtb-RIA-4444132.pdf
Regulatory Impact Statement: Deposit Takers Bill (Supplementary decisions), 13/10/2021: Regulatory Impact Statement: Deposit Takers Bill (Supplementary decisions) (rbnz.govt.nz)
Regulatory Impact Statement: Deposit Takers Bill (Supplementary decisions), 22/06/2022: https://www.treasury.govt.nz/publications/legislation/regulatory-impact-assessments | |
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| 2.3.1. If so, did the RIA Team in the Treasury provide an independent opinion on the quality of any of these regulatory impact statements? | YES |
| A Quality Assurance Panel with representatives from the Reserve Bank and the Treasury reviewed the ‘A New Prudential Framework for the regulation and supervision of deposit takers and the introduction of deposit insurance’ Regulatory Impact Assessment (RIA) produced by the Treasury and dated April 2021.
Representatives from the Reserve Bank reviewed the ‘Deposit Takers Bill (Supplementary decisions)’ Regulatory Impact Assessment (RIA) produced by the Reserve Bank and dated October 2021.
Representatives from the Reserve Bank reviewed the ‘Deposit Takers Bill (Supplementary decisions)’ Regulatory Impact Assessment (RIA) produced by the Reserve Bank and dated June 2022.
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| 2.3.2. Are there aspects of the policy to be given effect by this Bill that were not addressed by, or that now vary materially from, the policy options analysed in these regulatory impact statements? | NO |
Extent of impact analysis available
| 2.4. Has further impact analysis become available for any aspects of the policy to be given effect by this Bill? | NO |
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| 2.5. For the policy to be given effect by this Bill, is there analysis available on: |
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| (a) the size of the potential costs and benefits? | YES |
| (b) the potential for any group of persons to suffer a substantial unavoidable loss of income or wealth? | NO |
| The Reserve Bank has prepared three Regulatory Impact Statements in relation to the Bill, referred to in the answer to question 2.3, which include a detailed qualitative analysis on the potential costs and benefits. Prudential regulation of deposit takers (under the Bill or the Acts it will replace) affects the business models of regulated entities. One key aim is to reduce the risks of sudden losses of wealth (through firm failure) for depositors. The impact of individual policies adopted under the Bill in future will be examined through Regulatory Impact Assessments made in connection with consultations on proposed standards. | |
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| 2.6. For the policy to be given effect by this Bill, are the potential costs or benefits likely to be impacted by: |
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| (a) the level of effective compliance or non-compliance with applicable obligations or standards? | YES |
| (b) the nature and level of regulator effort put into encouraging or securing compliance? | YES |
| The Bill establishes a single regulatory framework for all deposit takers. The Bill, standards and regulations to be made under the Bill will largely continue the existing framework of obligations and prudential requirements that apply to deposit takers, while introducing some new requirements, particularly for non-bank deposit takers. The Bill will increase compliance requirements for non-bank deposit takers generally and, to a lesser extent, for banks. One key aim of the Bill is to reduce the risks of sudden losses of wealth (through firm failure) for depositors. The purposes of the Bill are to:
The most significant new elements of the Bill include:
The Reserve Bank will need to monitor deposit takers’ compliance with, and enforce obligations imposed by, the Bill, once enacted.
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Part Three: Testing of Legislative Content
Consistency with New Zealand’s international obligations
| 3.1. What steps have been taken to determine whether the policy to be given effect by this Bill is consistent with New Zealand’s international obligations? |
| The Core principles for effective banking supervision by the Basel Committee on Banking Supervision (the Basel Core Principles) sets out minimum standards for sound prudential regulation of banks. However, those standards are not strictly obligations. The Basel Core Principles have been taken into account as part of the policy development process. |
Consistency with the government’s Treaty of Waitangi obligations
| 3.2. What steps have been taken to determine whether the policy to be given effect by this Bill is consistent with the principles of the Treaty of Waitangi? |
| Some targeted consultation was undertaken with representative groups. This Bill does not impact on the principles of the Treaty of Waitangi. |
Consistency with the New Zealand Bill of Rights Act 1990
| 3.3. Has advice been provided to the Attorney-General on whether any provisions of this Bill appear to limit any of the rights and freedoms affirmed in the New Zealand Bill of Rights Act 1990? | YES |
| Advice provided to the Attorney-General by the Ministry of Justice, or a section 7 report of the Attorney-General, is generally expected to be available on the Ministry of Justice’s website upon introduction of a Bill. Such advice, or reports, will be accessible on the Ministry’s website at http://www.justice.govt.nz/policy/constitutional-law-and-human-rights/humanrights/ | |
Offences, penalties and court jurisdictions
| 3.4. Does this Bill create, amend, or remove: |
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| (a) offences or penalties (including infringement offences or penalties and civil pecuniary penalty regimes)? | YES |
| (b) the jurisdiction of a court or tribunal (including rights to judicial review or rights of appeal)? | YES |
| The Bill establishes new criminal offences, civil pecuniary penalty liability, and infringements offences for the breach of requirements imposed by or under the Bill. Refer to the table in Appendix 1 for further details. The Bill also establishes the High Court’s jurisdiction, on the application of the Reserve Bank, to enforce a voluntary undertaking entered into under the Bill, and impose any penalties established by the Bill. The Bill also gives rights to appeal certain regulatory decisions. | |
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| 3.4.1. Was the Ministry of Justice consulted about these provisions? | YES |
| The Reserve Bank consulted the Ministry of Justice on the provisions relating to offences and penalties, the New Zealand Bill of Rights Act 1990, and potential privacy considerations. The Reserve Bank engaged with the Ministry of Justice by email, and met with relevant Ministry of Justice representatives in person to discuss these matters. The Ministry of Justice was consulted on each Cabinet paper seeking relevant policy decisions. Feedback from the Ministry of Justice was reflected in the Bill, and the penalties for the infringement offences were adjusted to reflect guidance from the Ministry of Justice. | |
Privacy issues
| 3.5. Does this Bill create, amend or remove any provisions relating to the collection, storage, access to, correction of, use or disclosure of personal information? | YES
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| The Bill gives the Reserve Bank the ability to set standards relating to depositor compensation, including making available information to the Bank that is necessary or desirable for the Bank to carry out its functions, duties or powers relating to the Depositor Compensation Scheme (DCS). These standards may require deposit takers to produce and provide to the Reserve Bank, Single Customer View files for their customers to enable the Reserve Bank to administer the DCS. The Bill also enables the Reserve Bank to collect personal depositor information to open new accounts on behalf of depositors. The Bill further provides the Reserve Bank with extensive information gathering powers required for the supervision of deposit takers. | |
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| 3.5.1. Was the Privacy Commissioner consulted about these provisions? | YES |
| The Reserve Bank has consulted with the Office of the Privacy Commissioner about matters related to the collection and sharing of private information as part of the process of making a pay-out under the DCS. The purpose of this engagement is to ensure that only necessary information is shared for, and only for the purposes of, facilitating the pay-out process under the DCS. | |
External consultation
| 3.6. Has there been any external consultation on the policy to be given effect by this Bill, or on a draft of this Bill? | YES |
| Policy was developed by a team comprising the Reserve Bank of New Zealand and the Treasury. In developing the policy, the team produced a number of public consultation and issues papers. The most relevant papers are: Consultation 1: Safeguarding the future of our financial system: The role of the Reserve Bank and how it should be governed, 01/11/2018: https://www.treasury.govt.nz/sites/default/files/2019-03/rbnz-safeguarding-future-financial-system-c1.pdf Consultation Document 2A: In-principle decisions and follow-up questions on: The role of the Reserve Banks and how it should be governed, 24/06/2019: https://www.treasury.govt.nz/sites/default/files/2019-06/rbnz-safeguarding-future-financial-system-2a.pdf Consultation Document 2B: The Reserve Bank’s role in financial policy: tools, powers, and approach, 24/06/2019: https://www.treasury.govt.nz/sites/default/files/2019-06/rbnz-safeguarding-future-financial-system-2b.pdf Consultation Document 3: Further consultation on the prudential framework for deposit takers and depositor protection, 13/03/2020: https://www.treasury.govt.nz/sites/default/files/2020-03/rbnz-further-consultation-phase-2.pdf Exposure draft of the Bill: A round of public consultation on the exposure draft of the Bill was undertaken. The Reserve Bank published consultation documents, alongside summary material and background papers. The consultation ran from December 2021 to February 2022. Twenty-one submissions were received based on the exposure draft consultation. One submission requested the Reserve Bank to treat it as confidential in its entirety; the remaining 20 submissions have been published on the Reserve Bank website. Information and documents relating to the public consultation process, including summaries of public feedback, are available on the Reserve Bank’s website. Where appropriate, the Bill was amended to account for feedback from submitters. | |
Other testing of proposals
| 3.7. Have the policy details to be given effect by this Bill been otherwise tested or assessed in any way to ensure the Bill’s provisions are workable and complete? | YES |
| The International Monetary Fund (IMF) carried out a Financial System Assessment Programme (FSAP) review of New Zealand in 2016/17. The review identified a number of areas where New Zealand did not fully meet the Basel Core Principles for Effective Banking Supervision. The Reserve Bank has also further engaged with the IMF on the exposure draft. The Reserve Bank reached out and engaged with relevant agencies and bodies in other jurisdictions such as the Australian Prudential Regulation Authority, the Australian Treasury, the Bank of England and the International Association of Deposit Insurers. Given New Zealand’s role as host of large and systemically important Australian-owned banks, particular attention was paid to aspects of the Australian prudential regime in the development of the Bill. | |
Part Four: Significant Legislative Features
Compulsory acquisition of private property
| 4.1. Does this Bill contain any provisions that could result in the compulsory acquisition of private property? | YES |
| The Bill provides for powers to the Reserve Bank to address a deposit taker in financial distress, including taking control of a deposit taker and rearranging claims. However, this power exists in the Banking (Prudential Supervision) Act 1989; it is common internationally and listed under ‘Key attributes of Effective Resolution Regimes for Financial Institutions’ by the Financial Stability Board. The Bill goes further by giving the Reserve Bank the power to compensate creditors or shareholders that may be made worse off as a result of a resolution action relative to outcomes under liquidation. | |
Charges in the nature of a tax
| 4.2. Does this Bill create or amend a power to impose a fee, levy or charge in the nature of a tax? | YES |
| Clause 234 allows for regulations requiring deposit takers to pay levies for the purposes of funding the Depositor Compensation Scheme (DCS) and reimbursing the Crown for any public money used to make up a deficiency in the DCS fund in the event of a pay-out. Any target fund size for the scheme will be determined by the Minister of Finance’s Statement of Funding Approach. Deposit takers may also be required to pay levies to allow the Crown to recover the cost of providing public money to support to the resolution of a deposit taker (or associated person) or that is provided under an amendment to the Public Finance Act (PFA) (clause 465). The Bill will amend the PFA to address a gap in the crisis management framework around the ability for the Government to use public funds in cases where funds need to be provided quickly and exceed Imprest Supply or an existing available appropriation. | |
Retrospective effect
| 4.3. Does this Bill affect rights, freedoms, or impose obligations, retrospectively? | NO |
Strict liability or reversal of the usual burden of proof for offences
| 4.4. Does this Bill: |
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| (a) create or amend a strict or absolute liability offence? | YES |
| (b) reverse or modify the usual burden of proof for an offence or a civil pecuniary penalty proceeding? | NO |
| The Bill establishes number of strict liability offences. Refer to Appendix 2 for further details. | |
Civil or criminal immunity
| 4.5. Does this Bill create or amend a civil or criminal immunity for any person? | YES |
| The Bill makes a consequential amendment to the RBNZ Act 2021, adding the Deposit Takers Act (DTA), once enacted, to the definition of “prudential legislation” in the RBNZ Act 2021. This amendment brings the DTA within the scope of the immunities in sections 181 and 182 of the RBNZ Act 2021. The amendment also has the effect of carrying over existing immunities in respect of the supervision of registered banks (section 179 of the Banking Prudential Supervision Act 1989) and non-bank deposit takers (section 80 of the Non-bank Deposit Takers Act 2013). | |
Significant decision-making powers
| 4.6. Does this Bill create or amend a decision-making power to make a determination about a person’s rights, obligations, or interests protected or recognised by law, and that could have a significant impact on those rights, obligations, or interests? | YES |
| The following Parts and subparts in the Bill are notable in this regard:
These powers are necessary to ensure the stability of the financial system. | |
Powers to make delegated legislation
| 4.7. Does this Bill create or amend a power to make delegated legislation that could amend an Act, define the meaning of a term in an Act, or grant an exemption from an Act or delegated legislation? | YES |
| Part 3, subpart 1 allows the Reserve Bank to grant an exemption for deposit takers from holding a credit rating under certain circumstances. Part 8, subpart 5 authorises for regulations relating to the Depositor Compensation Scheme (including prescribing classes of persons that are not eligible investors under Part 6 of the Bill). Schedule 2, clause 6 provides that the Governor-General may, by Order in Council, declare that a person or a persons of a particular class is not a deposit taker for the purposes of the Deposit Takers Act. | |
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| 4.8. Does this Bill create or amend any other powers to make delegated legislation? | YES |
| The Bill contains provisions that allow the Reserve Bank to make legally-binding standards, which will apply to deposit takers. These standards are secondary legislation, and set requirements relating to a wide range of topics. The Bill includes safeguards around this power, including the requirement to consult with affected parties before standards are made, the requirement for standards to relate to certain matters, and the requirement for the Reserve Bank to have regard to certain principles when making standards. The Bill also authorises the making of regulations for a range of purposes. A full set of secondary legislation authorised under the Bill can be found in Appendix 2. | |
Any other unusual provisions or features
| 4.9. Does this Bill contain any provisions (other than those noted above) that are unusual or call for special comment? | YES |
| The Bill establishes the Depositor Compensation Scheme (DCS), a scheme to protect eligible depositors by up to $100,000 per deposit taking institution. The scheme will be funded by regulations imposing levies on deposit takers. These levies are expected to be proportionate to a deposit taker’s eligible depositor base and the risk profile of the deposit taker. DCS funds may also be used to support a resolution of a deposit taker as an alternative way to protect covered deposits. | |
Appendix 1: Further Information Relating to Part Three
Offences, penalties and court jurisdictions – question 3.4(a)
The Bill establishes new criminal offences, civil pecuniary penalty liability, and infringements offences for the breach of requirements imposed by or under the Bill. Strict liability offences are noted in Appendix 2.
| Deposit Takers Bill: fines for new offences and fines that have increased for existing offences carried over from the RBNZ 1989 Act | ||
| Indvl = individual |
| Penalty |
| 11 A person carries on deposit taking business without a licence | Indvl | Fine not exceeding $500,000 or imprisonment for a term not exceeding 2 years (or both) |
| 14 A person who is not licensed holds itself out to be licensed | Indvl | Fine not exceeding $500,000 or imprisonment for a term not exceeding 2 years (or both) |
| 24 A licensed deposit taker fails to comply with conditions of licence | Indvl
BC | Pecuniary penalty not exceeding $1,000,000 |
| 27 A licensed deposit taker appoints a new director or senior manager without RBNZ approval | BC | Fine not exceeding $500,000 |
| 29 A licensed deposit taker does not adhere to RBNZ’s suspension of director or senior manager | Indvl | Fine not exceeding $100,000 or imprisonment for a term not exceeding 1 year (or both) |
| 30 Overseas licenced deposit takers fails to notify Bank of a new director or senior manager within 20 working days | BC | An infringement fee of $10,000; or a fine imposed by a court not exceeding $25,000 |
| 31 Failure to provide fit and proper certificate for a director or senior manager | BC | An infringement fee of $10,000; or a fine imposed by a court not exceeding $25,000 |
| 33 A licensed deposit taker fails to notify RBNZ on becoming aware of fit and proper concerns | BC | Fine not exceeding $500,000 |
| 36 A licensed deposit taker (or the person removed as a director or senior manager) fails to comply with a direction not to be reappointed | Indvl | Fine not exceeding $50,000 |
| 40 Overseas licenced deposit taker that fails to notify Bank of change in control | BC | An infringement fee of $10,000; or a fine imposed by a court not exceeding $25,000 |
| 43 Overseas licensed deposit taker fails to notify Bank of amalgamation with another person | All | An infringement fee of $10,000; or a fine imposed by a court not exceeding $25,000 |
| 44 A licensed deposit taker fails to get RBNZ approval for changes of control, major transactions, etc./ comply with any conditions of approval | Indvl | Fine not exceeding $100,000 or imprisonment for a term not exceeding 1 year (or both) |
| 51 A licensed deposit taker fails to comply with any conditions of approval | Indvl | Fine not exceeding $100,000 |
| 60 A licensed deposit taker fails to hold a current credit rating | BC | Fine not exceeding $2,500,000 |
| 64 Failure to disclose a change in credit rating within 20 days | BC | An infringement fee of $10,000; or a fine imposed by a court not exceeding $25,000 |
| 65 Failure to disclose a credit watch warning within 20 days | BC | An infringement fee of $10,000; or a fine imposed by a court not exceeding $25,000 |
| 66 A licensed deposit taker fails to disclose rating on its website | BC | An infringement fee of $20,000; or a fine imposed by a court not exceeding $50,000 |
| 67 A licensed deposit taker fails to comply with requirements for advertising of credit rating | BC | An infringement fee of $20,000; or a fine imposed by a court not exceeding $50,000 |
| 68 A licensed deposit taker discloses rating from non-approved agency | BC | An infringement fee of $20,000; or a fine imposed by a court not exceeding $50,000 |
| 69 A licensed deposit taker fails to give public notice of credit rating downgrade | BC | An infringement fee of $20,000; or a fine imposed by a court not exceeding $50,000 |
| 73 Failure to comply with applicable standards | Indvl
BC | Pecuniary penalty not exceeding $1,000,000 |
| 83 Failure to comply with lending standard
| Indvl
BC | Pecuniary penalty not exceeding $1,000,000 |
| 92 Directors due diligence duty | Indvl | Pecuniary penalty not exceeding $1,000,000 |
| 100 A person fails to supply information | Indvl | Fine not exceeding $50,000 |
| 104 A person fails to give or publish a report | Indvl | Fine not exceeding $50,000 |
| 106 A person contravenes a requirement that information be audited or reviewed | Indvl | Fine not exceeding $50,000 |
| 114 An employee, director or agent of a licensed deposit taker fails to provide information or answer questions in the course of an on-site inspection | Indvl | Fine not exceeding $50,000 |
| 117 A licensed deposit taker fails to comply with its obligations to monitor and report contraventions | BC | Fine not exceeding $500,000 |
| 125 A licensed deposit taker contravenes a remedial notice, fails to give an amended remedial plan fails to comply with a remedial plan | BC | Fine not exceeding $2,500,000 |
| 129 A person hinders etc. an investigator or fails to comply with any lawful requirement of an investigator | Indvl | Fine not exceeding $100,000 |
| 132 A person publishes, discloses or uses information in contravention of confidentiality order | Indvl | Fine not exceeding $100,000 or imprisonment for a term not exceeding 1 year (or both) |
| 137 A person to whom an order is made to disclose a warning refuses or fails to disclose the warning | Indvl | Fine not exceeding $50,000 |
| 143 A licensed deposit taker fails to comply with a notice permitting an overseas supervisor to conduct an inspection of the deposit taker or provide the overseas supervisor with information | BC | Fine not exceeding $500,000 |
| 151 Contravention of undertaking | Indvl | Fine not exceeding $50,000 |
| 174 A person makes false declarations or representations to the Bank | Indvl | Fine not exceeding $100,000 or imprisonment for a term not exceeding 1 year (or both) |
| 179 A person participates in a deposit taking business in contravention of a banning order | Indvl | Fine not exceeding $100,000 or imprisonment for a term not exceeding 1 year (or both) |
| 192 Failure to publish a list of protected deposits | BC | An infringement fee of $20,000; or a fine imposed by a court not exceeding $50,000 |
| 255 No holding out that product is protected deposit | Indvl | Fine not exceeding $100,000 or imprisonment for a term not exceeding 1 year (or both) |
| 270 Offence for contravening prohibition | Indvl | Fine not exceeding $100,000 |
| 342 A person must not, without the Bank’s consent, transfer or remove from New Zealand any property of a licensed deposit taker that is in resolution. | Indvl | Fine not exceeding $500,000 or imprisonment for a term not exceeding 2 years (or both) |
| 343 Offence for destroying, altering, or concealing records | Indvl | Fine not exceeding $100,000 or imprisonment for a term not exceeding 1 year (or both) |
| 385 Failing to supply information | Indvl | Fine not exceeding $50,000 |
| 387 Use of information and confidentiality | Indvl | Fine not exceeding $100,000 or imprisonment for a term not exceeding 1 year (or both) |
| 399 Failure of valuer’s duties in relation to records | Indvl | Fine not exceeding $50,000 |
| 403 Issue, or permit the issue of, a covered bond other than | Indvl | Fine not exceeding $100,000 |
| 415 Failure to take corrective action | Indvl | Fine not exceeding $100,000 |
| 423 A financial service provider contravenes the restrictions on the use of restricted words | Indvl | Fine not exceeding $100,000 |
| 432 Use of restricted word in advertisement | Indvl | Fine not exceeding $50,000 |
| 434 Contravening requirement to change name | Indvl | Fine not exceeding $50,000 |
| 444 Unauthorised disclosure or use of information | Indvl | Fine not exceeding $100,000 or imprisonment for a term not exceeding 1 year (or both) |
Appendix 2: Further Information Relating to Part Four
Strict liability for offences – question 4.4
The Bill establishes the following strict liability offences:
| Clause | Offence | Penalty |
| 27 | A licensed deposit taker appoints a new director or senior manager without RBNZ approval | Fine not exceeding $500,000 |
| 33 | A licensed deposit taker fails to notify RBNZ on becoming aware of fit and proper concerns | Fine not exceeding $500,000 |
| 36(1) | A licensed deposit taker fails to comply with a direction for a director or senior manager not to be reappointed | Fine not exceeding $500,000 |
| 36(2) | A person removed as a director or manager accepts reappointment to a position of director or senior manager | Fine not exceeding $50,000 |
| 51 | A licensed deposit taker fails to comply with any conditions of approval | Indvl: Fine not exceeding $100,000 BC: Fine not exceeding $2,500,000 |
| 60 | A licensed deposit taker fails to hold a current credit rating | Fine not exceeding $2,500,000 |
| 100 | A person fails to supply information in compliance with notice under clause 99 | Indvl: Fine not exceeding $50,000 BC: Fine not exceeding $500,000 |
| 104 | A person fails to give or publish a report in contravention of requirements under clauses 101—103 | Indvl: Fine not exceeding $50,000 BC: Fine not exceeding $500,000 |
| 106 | A person contravenes a requirement under clause 105 that information be audited or reviewed | Indvl: Fine not exceeding $50,000 BC: Fine not exceeding $500,000 |
| 114 | An employee, director, or agent of a licensed deposit taker fails to provide information or answer questions required under clause 113, or resists, obstructs, or delays the Bank, in relation to an on-site inspection | Indvl: Fine not exceeding $50,000 BC: Fine not exceeding $500,000 |
| 117 | A licensed deposit taker fails to comply with its obligations to monitor compliance and report contraventions | Fine not exceeding $500,000 |
| 129 | A person hinders etc. an investigator or fails to comply with any lawful requirement of an investigator | Indvl: Fine not exceeding $100,000 BC: Fine not exceeding $2,500,000 |
| 137 | A person or an associated person of a deposit taker to whom an order is made to disclose a warning refuses or fails to comply with the order | Indvl: Fine not exceeding $50,000 BC: Fine not exceeding $500,000 |
| 143 | A licensed deposit taker fails to comply with a notice permitting an overseas supervisor to conduct an inspection of the deposit taker or provide the overseas supervisor with information | Fine not exceeding $500,000 |
| 151 | A person contravenes an undertaking that the person has given that is in force | Indvl: Fine not exceeding $50,000 BC: Fine not exceeding $500,000 |
| 270 | Offence for contravening prohibition on disclosing or publishing direction or notice | Indvl: Fine not exceeding $100,000 BC: Fine not exceeding $2,500,000 |
| 385 | Failing to supply information | Indvl: Fine not exceeding $50,000 BC: Fine not exceeding $500,000 |
| 399 | Failure to perform valuer’s duties in relation to records | Fine not exceeding $50,000 |
| 403 | Issue, or permit the issue of, a covered bond other than | Indvl: Fine not exceeding $100,000 BC: Fine not exceeding $2,500,000 |
| 415 | Failure to take corrective action | Indvl: Fine not exceeding $100,000 BC: Fine not exceeding $2,500,000 |
| 423 | A financial service provider contravenes the restrictions on the use of restricted words | Indvl: Fine not exceeding $100,000 BC: Fine not exceeding $2,500,000 |
| 432 | Use of restricted word in advertisement | Indvl: Fine not exceeding $50,000 BC: Fine not exceeding $500,000 |
| 434 | Contravening requirement to change name | Indvl: Fine not exceeding $50,000 BC: Fine not exceeding $500,000 |
Powers to make delegated legislation - question 4.8
The Bill contains provisions which authorise the Reserve Bank (RBNZ) or the Governor-General to make legally binding standards and regulations which will apply to deposit takers. These standards and regulations are secondary legislation, and set requirements relating to a wide range of topics as set out below.
| Clause | Description | Type | Maker |
| 2(4) | Order in Council to commence provisions of the Act | Order in Council | Governor-General |
| 6 | Regulations prescribing an Australian public authority for the purposes of the definition of Australian financial authority | Regulations | Governor-General |
| 17(1)(g) | Eligibility criteria for a licence | Regulations | Governor-General |
| 70 | Bank may grant exemptions from credit rating requirements | Exemption | RBNZ |
| 72 | Bank may issue standards for the purposes of the Act | Standards | RBNZ |
| 77 | Standards for governance and incorporation structure of deposit taker, and remuneration of, and incentives available to, directors, etc. | Standards | RBNZ |
| 78 | Standards for capital, liquidity, security interests, and credit ratings | Standard | RBNZ |
| 79 | Bail-in standards | Standard | RBNZ |
| 80 | Fit and proper person standards | Standard | RBNZ |
| 81 | Lending and other exposures standards | Standard | RBNZ |
| 82 | Regulations for class or classes of lending | Regulations | Governor-General |
| 83 | Lending standards for non-deposit taker lenders | Standard | RBNZ |
| 83 | Regulations authorising issuing lending for non-deposit taker lenders | Regulations | Governor-General |
| 84 | Standards for risk management, business continuity planning, and problem assets | Standard | RBNZ |
| 85 | Depositor compensation standards | Standard | RBNZ |
| 86 | Standards for covered bonds and securitisation | Standard | RBNZ |
| 87 | Disclosure standards | Standard | RBNZ |
| 88 | Standards for contingency and recovery plans and facilitating resolution | Standard | RBNZ |
| 89 | Standards for outsourcing, significant transactions, restriction or prohibitions on activities, internal controls, internal assurance, other matters prescribed in regulations | Standard | RBNZ |
| 89(1)(e) | Regulations prescribing other matters that standards may regulate | Regulations | Governor-General |
| 116(2)(c) | Other information requirements prescribed for a licensed deposit to include in contravention report | Regulations | Governor-General |
| 170 | Form for infringement notices | Regulations | Governor-General |
| 173 | Form for reminder notices | Regulations | Governor-General |
| 190(1)(v) | Meaning of eligible investor being a person of a class prescribed | Regulations | Governor-General |
| 191(1)(c)(ii) and (2)(d) | Meaning of protected deposit, debt securities specified to be, or declared not to be, protected deposit | Regulations | Governor-General |
| 201(2) | Compensation entitlement calculation manner | Regulations | Governor-General |
| 202(3) | Meaning of temporary high balance limit | Regulations | Governor-General |
| 203(2) | Specifying shares in protected deposits held by or on behalf of 2 or more persons jointly | Regulations | Governor-General |
| 204(2) | Shares in protected deposits held by or on behalf of 2 or more persons other than jointly | Regulations | Governor-General |
| 208 | Entitlement rules for deposits held on trust, excluding certain trusts | Regulations | Governor-General |
| 211 | The calculation of amount of person's protected deposits or share of protected deposits | Regulations | Governor-General |
| 212 | Regulations may take into account transactions that have not been processed at quantification time | Regulations | Governor-General |
| 213 | Regulations may take into account funds that are withdrawn or available to eligible investors during resolution | Regulations | Governor-General |
| 214 | Regulations may impose conditions on person’s entitlement to compensation | Regulations | Governor-General |
| 218 | Paying entitlements in a manner prescribed by regulations | Regulations | Governor-General |
| 230 | Regulations may prescribe maximum amount that may be used from the depositors compensation fund to support resolution and associated requirements | Regulations | Governor-General |
| 234 | Licenced deposit takers must pay levy prescribed by regulations for Depositor Compensation Scheme | Regulations | Governor-General |
| 236 | Interest on unpaid levies assessed at the rate and applied by the method (if any) prescribed by the regulations | Regulations | Governor-General |
| 237 | Levy regulations for licensed deposit taker | Regulations | Governor-General |
| 271 | Resolution of licensed deposit takers and associated persons | Order in Council | Governor-General |
| 272 | Order in Council declaring subsidiary to be acquired not in resolution | Order in Council | Governor-General |
| 276 | Limitation on application of provisions to covered bond and certain other securitisation SPVs | Regulations | Governor-General |
| 279 | Declaration that licensed deposit taker or associated person that is in resolution is no longer in resolution | Order in Council | Governor-General |
| 290 | Specified instrument and specified declarations as prescribed in regulation | Regulations | Governor-General |
| 311 | Declare that the whole or any part of any property, rights, and liabilities of A relating to its New Zealand business will vest in B on a date specified in the order | Order in Council | Governor-General |
| 330 | Ancillary or additional powers for the Bank or the resolution manager | Regulations | Governor-General |
| 333(2) | Order in Council to disapply provisions of certain Acts to licensed deposit taker in resolution | Order in Council | Governor-General |
| 364 | Prescribe the entities that fit within the definition of pre-resolution shareholder | Regulations | Governor-General |
| 368 | Valuer must act in manner prescribed by regulations | Regulations | Governor-General |
| 373 | Discount rate the valuer must apply | Regulations | Governor-General |
| 374 | Information that must be contained in the valuer’s draft report | Regulations | Governor-General |
| 377 | Permit or require the Bank to redact information from the published valuer's report | Regulations | Governor-General |
| 378(2)(d) | Other information that compensation notice sent to a pre-resolution creditor or pre-resolution shareholder must set out | Regulations | Governor-General |
| 379 | Manner in which information is to be made public | Regulations | Governor-General |
| 381 | Manner in which the Bank must may payment | Regulations | Governor-General |
| 383(3)(b) | Prescribing circumstances where transfer of entitlement by appointment or operation of law does not apply | Regulations | Governor-General |
| 392(1) and (2) | Who may be appointed as valuer—prescription of knowledge, experience, and skills, and meaning of independence requirements | Regulations | Governor-General |
| 402 | Meaning of an issuer—entity, or a member of a class of entities, specified in the regulations | Regulations | Governor-General |
| 408(2) | Determination of application for registration of covered bond programme—meeting of requirements | Regulations | Govenor-General |
| 408(2)(g) | Requirements for registration of covered bond programme | Standards | RBNZ |
| 417(e) | Matters to be reported by the cover pool monitor | Regulations | Governor-General |
| 418(4) | Securitisation arrangement of a type or class prescribed | Regulation | Governor-General |
| 426 | Bank may, by notice, authorise class of persons to use restricted words in name or title | Notice | RBNZ |
| 447 | Bank may, by notice, require class of persons to comply with requirements | Notice | RBNZ |
| 451 | General regulations | Regulations | Governor-General |
| 451(1)(c) | Regulations to authorise Bank to determine or prescribe, by notice, any matters under section 451(1)(b) | Regulations | Governor-General |
| 452 | Regulations relating to Depositor Compensation Scheme | Regulations | Governor-General |
| 465 | Levy regulations | Regulations | Governor-General |
| Sch 2, clause 1 | Definition of credit contract, excluding certain class of contract from definition | Order in Council | Governor-General |
| Sch 2, clause 2 | Definition of deposit taker, excluding a person or certain class of contract from definition | Order in Council | Governor-General |
| Sch 2, clause 6 | Certain declarations relating to credit contracts, debt securities, and deposit takers | Order in Council | Governor-General |