Reserve Bank given powers to regulate non-banks

Long-deliberated legislation extending the Reserve Bank's regulatory powers to non-bank deposit takers such as Building Societies, Finance Companies and Credit Unions passed through parliament today, scotching worries it might not make it through before an election is called within weeks. Reserve Bank Governor Alan Bollard said the passing of the amendments to the Reserve Bank Act were a significant step to help improve the resilience of non-banks. The Central Bank would require information from trustees of deposit takers, develop and enforce minimum prudential and governance requirements and administer credit rating rules. "We are encouraging non-bank deposit takers to move towards adopting the new regulatory standards as soon as possible. Trustees will continue to be front-line supervisors of deposit takers, and we look forward to working proactively with trustees as they work towards a more enduring role in the sector," Bollard said. "Credit ratings from reputable rating agencies will play an important role in the new regulatory arrangements. Credit ratings assist depositors to compare the level of risk they are taking with the return they are getting when they invest in a deposit taker," he said. The Reserve Bank would now work with deposit takers and trustees over the next two years to develop regulations, he said, adding it would also work with the Securities Commission to revise and simplify disclosure rules for deposit-takers. "These regulations will introduce consistent standards for key risk areas such as financial strength (capital), access to cash (liquidity) and lending to associated parties," the bank said. The new rules are expected to be introduced in 2010. The Reserve Bank is aiming to bring in liquidity and capital rules from the fourth quarter of 2010. It sees mandatory credit ratings by the end of 2009 and new governance obligations by late 2009. Finance Minister Michael Cullen said all deposit takers would require credit ratings by March 2010.