The Reserve Bank of New Zealand (RBNZ) is putting further moves to regulate non-bank deposit takers (NBDTs) out for discussion.
The Government moved in 2007 to regulate NBDTs after a number of finance companies collapsed. The regime is being implemented in two stages. The first stage included credit rating and prudential requirements and beefed up the powers of the central bank.
A consultation paper issued today progresses the second stage, including licensing, fit and proper requirements for directors and senior officers, and distress and failure management powers for the RBNZ.
"Although the full regime has been consulted on, we think it is important to consult on these features again," the RBNZ said.
"The regulatory regime has been developed to overcome gaps in the existing regulation of NBDTs, including the absence of minimum entry requirements, and inconsistency in governance and prudential requirements across the sector," it said.
In future licensed NBNTs will be required to meet minimum prudential requirements.
Fit and proper requirements also attempt to ensure those who run NBDTs have the necessary qualifications and integrity.
"We are proposing that the bank has a role in ensuring those who do not meet prescribed criteria are either not appointed, or can be removed by the bank."
Directors and senior office holders will be subject to fit and proper checks but the onus on ensuring they are fit and proper to perform their duties rests primarily with shareholders and directors. The central bank will have a secondary role.
If "trigger" criteria are breached the directors will be unable to certify that the person is fit and proper, and must not proceed with the appointment until they have confirmed the central bank does not object. The "trigger" includes criminal offending, conflicts of interest and bankruptcy.
The ownership and organisational structure of NBDTs should be transparent and easily verifiable, the consultation paper said.
"We are considering whether the use of a branch structure is appropriate and, if so, what conditions should be placed on the use of such a structure," the central bank said.