Finance Minister Grant Robertson says Cabinet has finalised new measures aimed at protecting New Zealanders’ interests in the banking and financial system.
The new measures include guaranteeing deposits of up to $100,000 per eligible institution.
In a statement this morning Robertson says this number was increased from $50,000 after feedback and will fully protect 93 per cent of depositors.
The reforms will also include a new process for setting lending restrictions, such as loan-to-value ratios.
Robertson said the changes, which are the final part of a comprehensive review of the Reserve Bank of New Zealand Act, have been the subject of extensive consultation.
"Taken together, the recommendations will considerably strengthen New Zealand’s financial system safety net and contribute to a robust framework of protections for depositors," he said.
"It also brings our protections into line with those in place overseas.
"While New Zealand’s financial system is sound and well positioned to withstand the stress posed by Covid-19, these reforms ensure the Reserve Bank is better equipped to protect and promote financial stability in the future."
Drafting of the legislation will get under way, with the bill expected to be introduced to Parliament near the end of this year.
Robertson said the aim was to have deposit insurance up and running in 2023.
"When enacted, these measures mean individuals will have up to $100,000 of their deposits in any eligible institution guaranteed in the event of the failure of an institution," he said.
"As well as instituting the deposit guarantee scheme, the measures we have confirmed today will improve regulation and supervision of deposit takers and strengthen New Zealand's financial crisis framework."
National's Finance spokesperson Andrew Bayly says Robertson needs to give Kiwis peace of mind that the new powers he’s proposing to give himself over bank lending won’t over-reach into retail banking.
“The Finance Minister needs to reveal the full details of what he’s planning, rather than casually mentioning it in passing at the bottom of a press release.
“We need to know how these new levers of power might be constrained, given how significant that could be.
“Grant Robertson might have an interest in restricting lending to property investors right now, but what if he turns his attention towards farmers or other groups the Government has an issue with?
“I encourage the Minister of Finance to release the Cabinet Paper on setting lending restrictions and reassure the country that he will not be giving himself the power to intervene in commercial banking."
Green Party finance spokesperson Julie Anne Genter said the changes were "overdue".
"The Green Party has been advocating for deposit protections for years so it’s great to see the Government confirming savings up to $100,000 will be protected, rather than the lower level originally proposed.
"Australia, the EU, Canada, and the US have had deposit protections for a long time. Until now, New Zealand has been the only developed country in the world where people can lose their savings if a bank makes a bad decision, and we’re pleased to see that will change.