Reserve Bank posts notice warning of bogus NZ 'bank' after interest.co.nz story outs it

Reserve Bank posts notice warning of bogus NZ 'bank' after interest.co.nz story outs it

The Reserve Bank has posted a notice on its website warning that an entity calling itself a New Zealand bank, City Savings Bank, isn't licensed or supervised by any New Zealand authorities.

The Reserve Bank warning comes two days after interest.co.nz informed the Reserve Bank of City Savings Bank's existence and a day after our story revealed it was aiming, with a small office on Auckland's Queen Street as its headquarters, to use this country's good reputation to raise money overseas and claimed to be regulated under the Reserve Bank of New Zealand Act when it wasn't.

The warning from the Reserve Bank notes City Savings Institution Limited, trading as City Savings Bank, uses the website: http://www.citysav.com.

"This company is not licensed or prudentially supervised by the Reserve Bank of New Zealand or any other New Zealand authority. It is not authorised to provide banking services or take deposits. Refer to the caution on this website page about 'New Zealand offshore finance companies'."

New Zealand law does not provide for any form of officially sanctioned offshore finance industry. And only banks registered with the Reserve Bank are allowed to use the word "bank" in their name.

The Reserve Bank says, however, under current New Zealand law it's not illegal for companies registered in New Zealand to offer “banking services” either here or overseas without being licensed. However, they can only do so provided they don't call themselves banks or imply they are registered banks, and this only applies if these companies don't take deposits from the New Zealand public.

A spokeswoman for the Reserve Bank noted that companies she described as New Zealand offshore finance companies" are ordinary companies registered by the Ministry of Economic Development's Companies Office, and their corporate registration and ongoing regulation is not overseen by the Reserve Bank.

"Furthermore, the Reserve Bank has taken action against a number of New Zealand offshore finance companies that inappropriately used ‘bank’ names, and will continue to do so when they come to our attention. We are also concerned about the damage such entities do to New Zealand’s reputation if they operate fraudulently overseas. This is why we publicly and privately warn people about doing business with this type of New Zealand company," the spokeswoman said.

Ministry of Economic Development says firm and manager are 'appropriately registered'

Interest.co.nz asked the Ministry of Economic Development yesterday morning whether it was aware of City Savings Institution's activities and whether it was taking any action over them. A Ministry of Economic Development spokesman replied late this afternoon that the Companies Office had "looked into the circumstances" of City Savings Institution Ltd, which "appears" to be trading as the City Savings Bank.

"Our enquiries indicate that City Savings Institution Ltd has been properly registered as a New Zealand company and as a financial services provider, the spokesman said. "City Savings Institution Ltd and (City Savings Bank general manager) Simon Virgo appear to be appropriately registered as financial service providers, as they have a place of business in New Zealand and provide financial services, which are the two threshold requirements for registration under the Financial Service Providers (Registration and Dispute Resolution) Act 2008."

He added that the Companies Office, as the operator of the register of financial services providers, takes steps to ensure all providers have an actual place of business in New Zealand so that its staff and those of other regulators, such as the Financial Markets Authority and the Reserve Bank, have access to records and employees should the need arise.

"The use by a company of the word 'bank' in its trading name is an issue for the Reserve Bank. The Companies Office does not allow companies to register the word 'bank' or similar terms in their company names, unless those companies have been authorised by the Reserve Bank," the Ministry of Economic Development spokesman added.

(Update adds additional comment from the Reserve Bank, plus the MED's comments).

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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.

4 Comments

Comment Filter

Highlight new comments in the last hr(s).

This should be interesting
Bureaucracy at work.
Simon Virgo is an officially registered / sanctioned FSP
First registered on 2 January 2012
http://www.business.govt.nz/fsp/app/ui/fsp/version/searchSummaryIndividualFSP/FSP193885/1.do
Assuming he is a recent arrival from the UK, what were the requirements to obtain NZ registration.
Is he a permanent resident or a visitor on a working visa?
Are applicants required to demonstrate their bona fides?
Now (already) he has broken the law operating a financial business illegally
Will the registrar cancel his registration?

Iconoclast, check out the comments I've added to the story from MED. Seems to me they're missing the point...

He wears a suit and tie...what else does he need. No punnishments..no arrests...do it again and again...how many are there that have not been detected...who knows...who cares!

I notice on their website this morning City Savings "Bank" has dropped the word "bank" from its name but still claims to be regulated by the Reserve Bank of New Zealand Act.