The National Party appears to have changed its tune over whether it thinks New Zealand should have a protection scheme for depositors.
In the terms of reference of the second phase of the Reserve Bank Act Review, deposit insurance was outlined as one of the areas that will be explored.
“The Review will consider the case for deposit protection mechanisms and possible options, including deposit insurance.”
Finance Minister Grant Robertson says deposit insurance was name-checked in the review because it had been raised a number of times by stakeholders in the first phase of the RBNZ Act Review.
New Zealand is the only OECD country without some kind of deposit insurance – a safety net for depositors that provides protection from losses caused if a bank's unable to pay its debts.
This is despite recommendations from the IMF in May last year that one should be adopted.
“To enhance its credibility and strengthen the financial safety net, the introduction of deposit insurance would be the best option,” the report said.
National, under John Key and Bill English, was opposed to the idea.
“We looked at deposit insurance and we found that wasn’t necessarily going to work from New Zealand’s perspective,” former Finance Minister Steven Joyce said in response to the IMF’s recommendations last year.
But now, Finance spokeswoman Amy Adams says it's an issue “worth looking at.”
“I’m not prepared to make a call one way or the other, but I think we do need to consider what would happen in the event of a significant wobble in the banking sector.”
She is reasonably open to the fact it’s timely to have a look at things, given what’s going on with the Royal Commission inquiry into banking in Australia.
“If you look at the Open Banking Resolution [Policy], it’s pretty clear that if it was called into play, there are a lot of questions marks over exactly how it would work and who would do which bits.
“So it’s timely those aspects be looked at and whether it’s still fit for purpose.”
National’s softening position on the issues brings it closer in line with other parties in Parliament.
Labour does not have a policy on deposit insurance currently (but used to back it), and says it’s open to what comes out of the review. In 2013 Finance spokesperson David Parker said a Labour-led Government would ensure the first $30,000 of all bank deposits would be protected.
ACT Party Leader David Seymour represents the only party that does not support the policy, saying it's a “monumentally stupid, morally hazardous policy for idiots.”
"I think that [deposit insurance] is something that's going to be here in the future. We need to work our way through what it means. I think people have been talking across each other a lot," Orr told interest.co.nz in April.
"The [Reserve] Bank here has got a policy called Open Bank Resolution. And that is the idea that if a bank is too large to fail, we have to keep it open. But we have to recapitalise. So the current owners or investors who have largely done their dough, how do you recapitalise it and how do you have the door open the next day?"
"As part of that open bank resolution, we've already said there can be a de minimis around depositors money that they will have access to. We just need to speak in better English to say 'you know you are going to have some cash there, you are going to be able to get your sandwiches, meet your bills, do all of that on the Monday. Because if it didn't happen that way, then that one bank failure creates all banks to fail, there's [bank] runs everywhere'," Orr said in April.