Wednesday 15th October 2008
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The details include information about tighter requirements on non-bank deposit takers; a fee for finance companies that are rated below BB or unrated; rating requirements for new entrants; coverage of non-resident depositors with New Zealand branches of overseas banks; senior debt requirements; and the approval process.
The scheme will cover all retail deposits of participating New Zealand-registered banks and retail deposits by locals in non-bank deposit-taking entities, and is designed to give assurance to New Zealand depositors in the current uncertain international financial market conditions.
Reserve Bank Governor Dr Alan Bollard and Acting Secretary to The Treasury Dr Peter Bushnell noted today that "as the retail deposit guarantee scheme is being implemented, a number of policy issues are arising that are being addressed".
Decisions have now been made to:
The deed for non-bank deposit-takers will be tailored to contain tighter controls including:
- limiting potential for stripping out funds through, for example, dividends, or payments to related parties;
- increasing reporting requirements and allowing the Crown to appoint an inspector; and
- enabling an assessment of whether business behaviour is taking place that would then result in breach of the terms of the guarantee
In addition there will be personal undertakings required from directors.
A fee of 300 basis points per annum will be charged monthly to finance companies that are rated below BB or are unrated (on the cumulative growth in the book since 12 October 2008).
New entrant requirements (eg companies seeking to come into the scheme that were not in existence or ineligible on 12 October 2008) must be BBB- rated or better in order to be eligible to apply to join the scheme.
Non-resident deposits in New Zealand branches of overseas banks will be brought into guarantee coverage.
However, the guarantee is limited to the total amount of the non-resident deposit base as at 12 October 2008 and up to a further 10 percent per year of that deposit value (to cover for interest and any variation in deposit level).
As building societies and credit unions issue subordinated debt the deed will ensure such deposits are covered by the guarantee. Subordinated debt issued by other entities will not be covered.
As announced earlier in the week, it has also been decided to include, with certain conditions, collective investment schemes (CIS) that invest solely in government debt or institutions subject to a government guarantee and in debt of non-bank guaranteed institutions to the level held on 12 October 2008.
ASSESSMENT AND APPROVAL PROCESS:
Specimen deeds for banks (including branches) and non-banks will be made available via the Treasury website later tonight (Wednesday 15 October).
The specimen deed for collective investment schemes will be made available late tomorrow.
Dr Bushnell said: "While no applications have been approved yet, once the final deeds are made available (tonight and tomorrow), the Treasury will work quickly to ensure that applications are processed and approvals made public. We expect this process to take a matter of days."
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