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.

Get it early – This article was first published on Newsroom Pro and/or included in Bernard Hickey’s ‘8 Things’ morning email of the latest in-depth business and political analysis. Get it early by subscribing now or starting a 28-day free trial.

Credible information is crucial in a crisis.

The pandemic is pushing us into an unknown and uncertain future. As the crisis unfolds the need for accurate, balanced and thorough reporting will be vital. Newsroom’s team of journalists is working hard to bring you the facts but, now more than ever, we need your support.

Reader donations are critical to what we do. If you can help us, please click the button to ensure we can continue to provide quality independent journalism you can trust.

Comments

Newsroom does not allow comments directly on this website. We invite all readers who wish to discuss a story or leave a comment to visit us on Twitter or Facebook. We also welcome your news tips and feedback via email: contact@newsroom.co.nz. Thank you.

With thanks to our partners