Reserve Bank decides to expand legal use of the words 'bank', 'banker' and 'banking'

The Reserve Bank (RBNZ) says all deposit takers it licences, including building societies, credit unions and finance companies, will be allowed to call themselves "banks" from 1 December 2028.

Currently use of the words 'bank', 'banker' and 'banking' is restricted under the Banking (Prudential Supervision) Act, which the RBNZ says is to help the public identify which entities are subject to prudential regulation. However, the RBNZ last year consulted on use of the word "bank" and now says all deposit takers will be able to call themselves banks if they are licensed under the Deposit Takers Act (DTA). 

"When the DTA comes into full effect on 1 December 2028, all licensed deposit takers, including entities currently licensed as non-bank deposit takers (NBDTs), will be able to use these restricted words. Overseas banks that do not have a physical presence in New Zealand can continue to use restricted words, as is authorised under the DTA," Angus McGregor, the RBNZ's Acting Assistant Governor for Financial Stability, says.

"We are satisfied that the DTA provides the necessary safeguards to extend the use of restricted words to all licensed deposit takers. This change supports improvements in the competitive landscape and a consistent approach across deposit takers, which was largely supported in consultation feedback,” says McGregor.

On top of the introduction of the Depositor Compensation Scheme, McGregor says the DTA provides for new supervision powers and a framework for managing and resolving a deposit taker in financial distress.

"The DTA also gives RBNZ greater power to monitor deposit taker stability and step in if a deposit taker’s financial situation or business practices are putting depositors’ money, and New Zealand’s financial system, at risk."

"The DTA provides for closer regulation of all deposit takers and gives us new powers to make sure entities able to call themselves banks are doing the right things to keep depositors’ money safe," McGregor says.