Coleman Jonathan: Non-bank Deposit Takers Bill — In Committee Third ReadingText is incorporated into the Bound VolumeColeman Jonathan: Non-bank Deposit Takers Bill — In Committee Third Reading[Sitting date: 19 November 2013. Volume:695;Page:15035. Text is incorporated into the Bound Volume.]Hon Dr JONATHAN COLEMAN (Associate Minister of Finance) on behalf of theMinister of Finance: I moveThat the Non-bank Deposit Takers Bill be now read a third time. I want to begin by thanking the members of the Finance and Expenditure Committee and officials who have engaged with the industry the wider financial sector and other interested parties. The purposes of the bill are to promote the maintenance of a sound and efficient financial system and to avoid significant damage to the financial system that could result from the failure of a non-bank deposit taker. The bill will not create a zero failure regime but by completing the implementation of the regulatory regime for non-bank deposit takers which mainly comprise finance companies building societies and credit unions this bill will achieve those purposes.The bill creates a stand-alone framework for the prudential regulation of non-bank deposit takers. It incorporates the prudential requirements already imposed under Part 5D of the Reserve Bank of New Zealand Act 1989 and introduces new measures including the licensing of non-bank deposit takers suitability assessments for directors and senior managers restrictions on changes of ownership and new powers for the Reserve Bank to detect and manage instances of distress or failure of non-bank deposit takers.Licensing is at the heart of the bill with the establishment of a licensing regime and a requirement for all non-bank deposit takers to be licensed by the Reserve Bank. An important part of this is the suitability requirements for directors and senior officers of non-bank deposit takers and the opportunity this gives for the Reserve Bank to identify those who are clearly not suitable to hold positions of responsibility within the industry. Licences may also be issued subject to conditions. The bill sets out the types of matters that may be covered by conditions and the consultation procedure to be followed if the Reserve Bank wishes to add new conditions or amend or revoke existing conditions of licence. There is also an express obligation for non-bank deposit takers to comply with the conditions of their licence so that a failure to comply with a licence condition becomes a failure to comply with the Act. Breaching such a condition will be grounds for cancelling a licence.Following licensing the non-bank deposit taker must then comply with the prudential requirements that are already in place under Part 5D. Any substantial changes in ownership over a prescribed threshold must have the consent of the Reserve Bank. The powers of the Reserve Bank to address breaches of prudential requirements have also been strengthened to be more in line with the Reserve Bank’s powers under thebanking and insurance regimes. In particular the bill provides the bank with the power to direct non-bank deposit takers and their associated persons in particular circumstances. Amongst other things the Reserve Bank can direct that a non-bank deposit taker takes specified action to address any financial or other difficulties it may be subject to.Under the bill the Reserve Bank is also able to remove and appoint directors where the non-bank deposit taker is in financial difficulty or failing to comply with statutory requirements. Under the bill trustees remain the front-line supervisors of non-bank deposit takers’ compliance with prudential requirements such as those relating to capital and related party exposures. To help ensure that the Reserve Bank can intervene where necessary when a non-bank deposit taker is involved in an actual or potential breach of its obligations under the prudential regime the bill provides the Reserve Bank with the power to direct trustees to take certain specified actions in these situations.During the Committee of the whole House stage additional amendments were included in the bill by Supplementary Order Papers 99 and 394. These amendments were largely technical in nature and in many cases were necessitated by the recent enactment or coming into force of other legislation most notably the Financial Markets Conduct Act. Along with the changes recommended by the Finance and Expenditure Committee these changes have helped to ensure that the bill is well designed and will operate efficiently.To sum up the bill will increase confidence in the New Zealand deposit-taking sector and enhance the Reserve Bank’s ability to promote the maintenance of a sound and efficient financial system. It represents an important milestone by putting in place the final components of the prudential measures applicable to the non-bank deposit taker sector. From its first reading in Parliament in August 2011 this bill has received broad cross-party support and the general support of industry. Again I want to thank the Finance and Expenditure Committee those who made submissions and officials for their work on this bill. I commend the bill to the House.