Building societies and credit unions are mulling over whether they’ll call themselves ‘banks’ once the Reserve Bank allows all licensed deposit-taking institutions to use banking terminology.
From 1 December, 2028, all deposit takers that the Reserve Bank (RBNZ) licences, including building societies, credit unions and finance companies, will be able to call themselves “banks”.
This change is part of the rollout of the Deposit Takers Act (DTA), which will be fully implemented by December 2028. The new framework will oversee the regulation of all banks and non-bank deposit takers (NBDTs) in New Zealand under a single prudential regime.
Currently, the use of the words ‘bank’, ‘banker’ and ‘banking’ is restricted under the Banking (Prudential Supervision) Act. According to the RBNZ, this is to help the public identify which entities are subject to prudential regulation.
The RBNZ now believes the DTA will provide the necessary safeguards to extend the use of restricted words to all licensed deposit takers.
Unity Credit Union chief executive Kevin Hughes isn’t sure if the member-owned financial cooperative will call itself a bank when 2028 rolls around.
“However, from December 2028, we will almost certainly take the opportunity to start using some of the terminology that is currently restricted. For example, using the term ‘banking’ in our communications,” he said.
“The good thing is we [will be able to] talk to our members in a way that they understand what we're talking about in language that's more commonly known rather than having to tiptoe our way around it.”
While there is an “intangible sort of comfort or trust” that comes with the word bank, Hughes said choosing not to rename the credit union as a bank could also be a good thing.
“Credit unions are differentiated by purpose and design and are covered by the Friendly Societies and Credit Unions Act. Continuing to call ourselves a credit union while having the regulations of a ‘bank’ may be a competitive point of difference,” he said.
Hughes said access to banking terminology is unlikely to impose any additional costs beyond normal expectations; however, extra costs and regulatory requirements have already been clearly signalled as part of the DTA.
Credit unions and building societies fall under the third group of the RBNZ’s proportionality framework for deposit takers. Hughes said the standards that apply to this group will inevitably be at a higher level than those currently covered by the Non-Bank Deposit Takers Act (NBDTA).
“The RBNZ is in the process of consulting with the sector on the detail in these standards, so it is too soon to estimate how proportionality will be applied and therefore the full impact for Group 3,” he said.
‘Do you build houses?’
Wairarapa Building Society (WBS) chief executive John Healy said WBS hasn’t decided if the building society will take up the banking moniker in 2028 either.
“Some people go, if you start saying building society, they say, oh, do you build houses?”
"So I think [the changes in terminology] can help in terms of explaining what we do better. But I do think it's important that anyone that is allowed to use the term bank or call themselves a bank, they should be appropriately supervised by the RBNZ,” he said.
Healy also sees the terminology changes as a way to show more customers that building societies and credit unions are viable alternatives to the large Australian-owned banks. New Zealand’s biggest banks – ANZ, ASB, BNZ and Westpac – are responsible for 84% of bank lending in NZ.
“It can help [with] competition in whatever segments of the market we choose to compete with [as we have] quite a different business model to the Australian-owned banks,” Healy said.
WBS’ loan and deposit books grew by 14% and 12% respectively in the 12 months to 31 March, according to Healy. He credited this growth to the building society spending the past two to three years focusing on “boosting” WBS’ local profile in the Wairarapa.
‘More than the label on the door’
Despite all deposit takers being able to start using the same labelling from the end of 2028, “they’re not going to be the same,” SBS Bank chief executive Mark McLean said.
“They’re going to have different capital structures, going to offer different services, different ownership models. So it's probably more than just that label on the door,” McLean told interest.co.nz.
SBS is a building society that became a registered bank in 2008. The bank has retained its building society structure and is member-owned.
McLean said customers will need to be “aware and conscious” that all [deposit-taking] institutions are going to be able to call themselves banks and take necessary precautions.
“You’ll need to look a bit beneath that and understand the track record of the institution, how long it’s around or how the funds are protected,” he said.
More mergers on the horizon?
The Co-operative Bank CEO Mark Wilkshire told interest.co.nz last week that the RBNZ's decision to allow all licensed deposit takers to call themselves banks could spark more merger and acquisition activity.
Wilkshire said some entities will face increased regulatory requirements, which could perhaps make the option of merging more attractive, or necessary.
Unity’s Hughes said he didn’t think mergers and acquisitions (M&A) will be driven by changes in what licensed deposit takers will be allowed to call themselves.
Instead, he thinks any M&A activity will be a byproduct of the relicensing processes that existing deposit takers have to go through ahead of the new DTA standards being implemented at the end of 2028.
“For some organisations, what that means from a requirement point of view may cause some of them to consider whether that means that they are as viable as they may have been before that requirement was passed,” Hughes said.
SBS’ McLean doesn’t see a direct correlation between the shift in wording and the encouragement of more mergers and acquisition activity between deposit takers either.
“I think what it does do is it creates more competition. So I don't think that mergers and acquisitions really align with that,” he said.
“This is another initiative from the Reserve Bank which will increase competition, which we're very comfortable with. Ultimately it's going to be good for consumers.”
Financial Strength Dashboard to be spruced up
An RBNZ spokesperson told interest.co.nz that the RBNZ intends to include all licensed deposit takers on its Bank Financial Strength Dashboard after the new licences under the DTA take effect on 1 December 2028.
“Our intention is that the updated dashboard will cover all licensed deposit takers, including banks, credit unions, building societies and finance companies,” the spokesperson said.
“We expect to have these updates in place by early to mid-2029. We are still developing detailed plans and will keep deposit takers and the public updated.”
All licensed deposit takers being able to call themselves banks follows the introduction of the Depositor Compensation Scheme on July 1, 2025, which means depositors at a failed deposit taker are eligible for compensation of up to $100,000 per depositor, per deposit taker.
*This article was first published in our email for paying subscribers. See here for more details and how to subscribe.
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.