Govt toughens rules for non-bank finance firms
The Government is introducing legislation to further tighten the rules for non-bank deposit takers (NBDTs) – a move Finance MInister Bill English describes as another step in lifting investor confidence in financial institutions.
The Non-Bank Deposit Takers Bill - to go before parliament next week - introduces licensing requirements and strengthens the Reserve Bank's powers, completing a new regulatory regime for NBDTs.
"From 2006, deposits of about $8.6 billion were put at risk by finance industry failures," Mr English says. "A key focus of this Government has been supporting measures to ensure the right protections are in place to lift investor confidence.
"Last year we implemented the first stage of prudential regulation for non-bank deposit takers – bringing in rules around credit ratings, risk management, governance, capital, related party exposures, and liquidity. This bill completes that regulation. It gives the Reserve Bank the power to remove directors and issue directions in certain circumstances."
The bill will require NBDT directors to notify the Reserve Bank if a director or senior officer triggers new prescribed suitability criteria. The Reserve Bank will have the power to remove those individuals.
The bill is expected to become fully effective on 1 June 2013, after a one-year transition period to enable existing NBDTs to meet the new licensing rules.