(Bloomberg) -- New Zealand plans to introduce a bank deposit protection regime to bring it into line with other developed nations and increase public confidence in its lenders.
“New Zealand has been an outlier for many years in that we don’t have a formal deposit protection regime to support Kiwis if a bank were to fall over,” Finance Minister Grant Robertson said in a statement Monday in Wellington. “A deposit protection regime will increase public confidence in the banks.”
The government is proposing a limit of between NZ$30,000 and NZ$50,000, which would cover 90% of individual bank deposits, Robertson said. Final decisions and details will be announced in early 2020, he said. He gave no details on the cost or funding proposals for the regime.
Adopting deposit protection is part of a review of the Reserve Bank’s underlying legislation and follows reports from the OECD and IMF that said New Zealand’s banking system might be more vulnerable in a crisis without one. Separately, the RBNZ has proposed that banks increase their capital buffers to make them more resilient.
Robertson said the next phase of the review of the RBNZ will look at whether its supervisory regime is sufficiently strong, and will also review the enforcement tools the central bank has -- including whether penalties are tough enough to discourage certain behavior.