The Government of New Zealand plans to introduce a deposit protection regime that would protect the New Zealand citizens if a bank collapsed, according to the Finance Minister Grant Robertson. He also added that the government is looking forward to work to strengthen the supervision of Banks.
“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,” said Robertson, "This would cover 90 percent of individual bank deposits in New Zealand, which is similar to international schemes. It follows consultation with the sector," he added.
Robertson explained that they're following the advice of the International Monetary Fund and the Organisation for Economic Co-operation and Development.
"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 will increase public confidence in the banks," he said.
Robertson also said that this new system would "increase public confidence in the banks" and would protect costumers.
"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," Robertson said, adding that the government is investigating whether the Reserve Bank's enforcement tools and the supervisory regime are "tough enough" and considering oversea frameworks (especially the United Kingdom's and Australia's) that would improve the accountability of the financial institutions.
"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," he said about the Australian Bank Executive Accountability Regime and UK's Senior Managers Regime, which assign duties to the individuals at the Banks.
New Zealand is backing deposits up to NZ$30,000 to NZ$50,000 from the first half of 2020, according to the New Zealand prime minister Jacinda Ardern, though final decisions related to this new system will be announced early next year.