Background

Depositor compensation schemes have come under increased focus following the recent collapse of Silicon Valley Bank which had a high proportion of uninsured deposits. New Zealand is one of just two countries in the Organisation for Economic Cooperation and Development that does not currently have deposit insurance. This will change if the much-anticipated Deposit Takers Bill (DT Bill) is enacted. The DT Bill was reported back by the Finance and Expenditure Committee (the Select Committee) on 11 April 2023 which recommended by majority that it be passed (with limited amendments) and is expected to come into law after receiving Royal Assent in mid-late 2023 with a phased transition period.

The key changes contemplated by the DT Bill are:

  • the creation of a Depositor Compensation Scheme (DCS) to protect deposits held in banks and licensed non-bank entities;
  • the strengthening of the crisis management ...