Ratings Required for NZ Non-Bank Institutions

March 1, 2010 Taxation in New Zealand

The Seat of GovernmentThe New Zealand Government has announced that from March 1st 2010 credit ratings will be mandatory for non-bank deposit-takers (NBDT) operating within the country.

In a press conference held on March 1st Alan Bollard, New Zealand Reserve Bank Governor, said that the Reserve Bank intends to progressively introduce prudential measures to insure the resilience of New Zealand’s non-banking finance sector, and mandatory credit ratings for deposit-taking institution are an invaluable step in towards the goal.

By the new regulation, the largest finance companies, building societies and credit unions, are required to receive a credit rating by Fitch Ratings, Moody’s Investors Service, or Standard & Poor’s Ratings Services. Organizations with consolidated liabilities below NZD 20 million (approx. USD 14.02 million) are not obligated to receive a rating, on the condition of the Reserve Bank having received notification of its exempt status. Currently, 28 New Zealand NBDTs already hold a credit rating, and an additional 45 orginizations have a previously acknowledged exemption under minimum threshold condition.

The regulatory introduction was spurned by the collapse of several prominent NBDTs across New Zealand in recent years. With the mandatory credit ratings the Reserve Bank hopes to increase depositor knowledge and minimize the possibility of consumers losing their investments through ill-informed decisions. Making a closing comment on the announcement the Reserve Bank Governor said, “It’s up to the investor to make the final decision as to where to invest their money and credit ratings are a very useful tool to help them.”

Photo by Ewan-M