Economy

Deposit insurance and new regulation for bank execs

The Government has announced the second tranche of reforms to the Reserve Bank Act, including increased accountability for banking executives and a bank deposit insurance scheme.

Finance Minister Grant Robertson has announced plans for tougher regulation of banks and their executives by mid-2020.

"New Zealand has a strong and stable banking system, but it is regulated by laws that are 30 years old. We’re making sure they’re up-to-date," he said. The decisions come from the second phase of the Government's review of the Reserve Bank Act and incorporate some lessons from the Australian Royal Commission into banking.

One of the major changes will be to increase director and executive accountability.

"It’s important that Kiwis have confidence in the people running our banks and know the consequences they’ll face. We’ve seen examples of how confidence was shaken overseas and we’re acting to make sure New Zealand has a world-leading accountability regime," Robertson said.

Banks would also be required to take out deposit insurance covering at least $50,000. This means that if a bank goes under, its customers would each be able to recover $50,000 or the full amount of their deposit if it was under $50,000.

In June, Robertson said such a limit would fully cover around 90 percent of individual bank depositors and 40 percent of all funds in banks. The deposit insurance scheme would be included in a new Deposit Takers Act, to be introduced to Parliament after Cabinet makes final decisions in mid-2020.

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