- Hon Nicola Willis
The levies that banks, building societies, credit unions and finance companies pay to the new Depositor Compensation Scheme (DCS) fund will reflect the size and riskiness of the institutions, Finance Minister Nicola Willis says.
Under the scheme, deposits up to the value of $100,000 per depositor will be protected in the event of a deposit taker failing.
“The Government has decided on a risk-based approach to levy funding, which reflects the likelihood of a DCS payout occurring, the impact of the levy on entity soundness and the predictability of levy payments,” Nicola Willis says.
“The levy will be based on total deposits covered by the scheme, so the four largest banks will pay about three quarters of the total.”
Nicola Willis says that while the levy will generally be risk based, credit unions and building societies will pay a temporary flat levy until the new prudential regime is fully in force in 2028.
“This reflects careful consideration of the impact of the levy on entity soundness, during a period of significant regulatory change for this sector.
“I note the Commerce Commission recommendation that the Government err on the side of not adding to the burden of smaller deposit takers, until the effects of the DCS become clearer.
“Although the DCS legislation does not prescribe competition as one of the matters that may be considered in setting the levy, the Government expects the DCS to improve competition overall.
“New Zealanders are more likely to be willing to switch deposit takers if they know their deposit is protected in the event of a deposit taker failing.”
Retail deposits, current and savings accounts, and term deposits will be covered by the DCS. Deposit takers’ websites will list their products covered by the DCS.
The levies collected from deposit takers will be used to build up the DCS fund so that money is available if compensation needs to be made. The Reserve Bank will collect the levies and administer the fund.
Nicola Willis says she will monitor the impact of the DCS on competition and, if necessary, will support a review of the relevant legislation.
Reserve Bank New Zealand proactive release of documents available here:
- Policy advice and Cabinet documents:
- Summary of Submissions from Public Consultation:
