RBNZ announced that the Cabinet signed off an in-principle decision to introduce a deposit protection regime in New Zealand, as a result of work under Phase 2 of the review of the Reserve Bank Act. The government is also considering an accountability regime along the the lines of Bank Executive Accountability Regime in Australia and the Senior Managers Regime in UK. Final decisions on the full details of a deposit protection regime and the strengthened accountability standards will be announced in early 2020.
The government is proposing a limit between $30,000 and $50,000 for the deposit protection regime. This would cover 90% of individual bank deposits in New Zealand, which is similar to the international schemes. This follows a consultation with the sector. The Finance Minister Grant Robertson said, “New Zealand has been an outlier for many years in that we don’t have a formal deposit protection regime to support Kiwis if a bank were to fall over." Banks in the country are "safe and sound" but "the OECD and IMF have said that our banking system might be more vulnerable in a crisis because we don’t have a deposit protection regime." A deposit protection regime is expected to increase public confidence in the banks.
The government is also ensuring that bank regulators in New Zealand have the right tools to hold the banks and their executives to account. The Cabinet has decided that the next consultation in Phase 2 of the RBNZ review will look at whether the supervisory regime of RBNZ is sufficiently strong. It will also review the enforcement tools RBNZ has, including whether penalties are tough enough to discourage certain behavior. The government is considering adopting elements of overseas frameworks, which would increase the responsibilities and accountabilities of senior executives for the actions of banks and licensed deposit-takers in New Zealand. The Bank Executive Accountability Regime in Australia and the Senior Managers Regime in the UK are two examples of frameworks that assign duties to individual decision-makers at banks, so that if things go wrong the individuals directly responsible can be identified and held to account. “These regimes go a step further than New Zealand’s current Director Attestation Regime for banks, by also holding senior managers to account for the prudent management of their bank within their area of responsibility,” Grant Robertson says.
Keywords: Asia Pacific, New Zealand, Banking, Deposit Protection, Accountability Regime, Operational Risk, RBNZ
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