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WELLINGTON, June 24 (Reuters) - New Zealand Finance Minister Grant Robertson said on Monday the government would introduce a deposit protection regime and begin work to strengthen oversight of banks amid heightened scrutiny of the local financial sector.
“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,” Robertson said in a statement, adding that the move followed advice from the International Monetary Fund and the Organisation for Economic Co-operation and Development.
The government was considering the guarantee of deposits up to NZ$30,000 ($19,797.00) to NZ$50,000, the latter of which would cover 90% of individual bank deposits.
Prime Minister Jacinda Ardern said at a media conference that the regime would be introduced in the first half of 2020.
Robertson told reporters that whether the banks or government bore the risk of the guarantee was still to be decided, but in other countries the guarantee would be funded by a bank levy and the government would then intervene as required.
The move was part of the second phase of the Labour-led coalition government’s review of the legislation covering the Reserve Bank of New Zealand (RBNZ). The first step widened the central bank’s monetary policy mandate to include maximising sustainable employment alongside its goal of inflation targeting.
The government also planned to do work on whether banks’ executives accountability should be ramped up and the central bank’s supervisory role strengthened.
That came after the abrupt resignation of ANZ Bank’s New Zealand chief executive and the bank losing permission to run its own risk assessments.
The changes could follow the path of regimes in Australia and the United Kingdom which require individuals to be held directly responsibility if things went wrong, the finance minister said, declining to comment specifically on ANZ.
The financial sector has been in the spotlight in the past year, as a Royal Commission inquiry in Australia made a series of revelations of wrongdoing by major financial institutions, many of them parent companies of New Zealand’s largest banks.
The RBNZ alongside the country’s other financial regulator the Financial Markets Authority had reviewed New Zealand’s banks culture and conduct and not found the problems uncovered in Australia, but said there were weaknesses in banks’ risk management and tighter regulation was needed. ($1 = 1.5154 New Zealand dollars) (Reporting by Charlotte Greenfield; Editing by Richard Borsuk & Kim Coghill)