New Zealand’s central bank must support non-bank lending
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NEW Zealand’s central bank must ensure the nation retains the right mix of non-bank lenders to safeguard alternative sources of finance.
Non-bank deposit takers, such as finance companies, credit unions and building societies, play an important role in providing access to financial services for New Zealanders who may otherwise struggle to get funds from big banks, according to parliament’s finance and expenditure select committee, which on Tuesday (Apr 11) reported amendments to the Deposit Takers Bill.
“We have been concerned that the bill as introduced could lead to a reduction in diversity within the sector, potentially affecting financial inclusion, competition and innovation,” the committee said.
The legislation is the second of two bills introduced to reform the Reserve Bank of New Zealand (RBNZ). It modernises the framework for prudential regulation and supervision of banks, finance companies and credit unions, and also introduces a deposit insurance regime. An earlier law that sets out the RBNZ’s financial stability and monetary policy objectives and processes has already been passed.
The committee said there was a risk the original financial stability purpose of the bill could be interpreted too narrowly by the RBNZ. It amended the legislation to require the bank to “support New Zealanders having reasonable access to financial products and services provided by the deposit-taking sector”.
The committee said small deposit takers were worried the new law may bring “disproportionate and highly onerous” levels of regulation.
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“The overall risk to financial stability associated with smaller deposit takers is generally lower than the risks posed by large registered banks,” the committee said. “The requirements that may be needed to ensure that banks are operating prudently may be excessive for achieving the goal of ensuring that smaller entities are too.”
In response, the law will now require the RBNZ to take into account the different scale of deposit takers as it creates regulatory standards for the sector. BLOOMBERG
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