WELLINGTON (Reuters) - The New Zealand government said on Wednesday it plans to introduce a deposit protection regime and expand its powers to monitor banks and hold directors and executives accountable for their actions.
The move is part of the second phase of New Zealand’s Labour-led coalition government’s review of the legislation covering the Reserve Bank of New Zealand (RBNZ). The first step introduced last year widened the central bank’s monetary policy mandate to include maximizing sustainable employment alongside its goal of inflation targeting.
“New Zealand has a strong and stable banking system, but it is regulated by laws that are 30 years old. We’re making sure they’re up-to-date,” Finance Minister Grant Robertson said in a statement.
Robertson said the government plans to introduce a deposit insurance scheme limit of NZ$50,000 ($32,035.00) per institution. The scheme would ensure more than 90% of depositors would be fully covered and many of the others would have most of their deposits covered, said Robertson, adding that this was consistent with international best practice.
The government wants to establish a governance board to oversee financial stability matters, he said, and would introduce measures to increase transparency at the RBNZ, including more oversight.
RBNZ Governor Adrian Orr said the bank welcomed the changes.
“These decisions strike a balance between maintaining the independence of the Bank and ensuring there is greater transparency and accountability about the Bank’s work,” Orr said in a separate statement.
Consultations on the government’s plans would continue next year.
The government’s proposed changes include an in-principle decision to follow recent reforms in Australia’s banking sector, Robertson said.
The Australian financial sector has been in the spotlight in the past year, as a Royal Commission inquiry made a series of revelations of wrongdoing by major financial institutions, many of them parent companies of New Zealand’s largest banks.
On Tuesday, Australia’s banking regulator said it would use its increased investigative powers to examine whether Westpac Banking Corp (WBC.AX) executives broke the law as part of a money laundering scandal.
Reporting by Praveen Menon; Editing by Chris Reese and Leslie Adler