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Deposit Takers Act 2023

Regulation of deposit takers - Credit rating

71: Restriction on Bank’s exemption power

You could also call this:

"Banks can't always choose to ignore rules, they must follow special conditions when making exceptions."

Illustration for Deposit Takers Act 2023

The Bank has the power to exempt some deposit takers from following certain rules, but it must be careful when doing so. You need to know that the Bank can only grant an exemption if it is satisfied that the exemption will not go against the purposes of the Deposit Takers Act. The Bank also needs to think about whether the costs of following the rules would be too high compared to the benefits of following them.

When the Bank is considering whether to grant an exemption, it must think about the size and type of businesses that will be affected by the exemption. The Bank must also consider how the risks of not having a credit rating can be managed, for example by requiring the deposit taker to hold more capital.

The Bank's decision to grant an exemption must be reasonable and not too broad, it must only be as wide as it needs to be to solve the problem that led to the exemption, you can find more information about the Bank's principles in section 59 and section 4 of the Act.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS522116.

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70: Bank may grant exemptions from credit rating requirements, or

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Part 3Regulation of deposit takers
Credit rating

71Restriction on Bank’s exemption power

  1. The Bank must not grant an exemption from compliance with section 59 unless it is satisfied that—

  2. the exemption is not inconsistent with the purposes of this Act; and
    1. the costs of compliance with the provision would be unreasonable or not justified by the benefit of compliance; and
      1. the extent of the exemption is not broader than is reasonably necessary to address the matters that gave rise to the exemption.

        1. When considering the matters under subsection (1), the Bank must have regard to—

        2. the size and nature of the businesses of the licensed deposit takers to which the exemption will relate; and
          1. the extent to which the risks associated with not having a credit rating could be addressed or mitigated by the terms or conditions of the exemption (for example, a condition that requires an exempted deposit taker to hold additional capital).

            1. Subsection (2) does not limit section 4.

              Guidance note

              Section 4 requires the Bank to take into account certain principles. Those include the desirability of the deposit-taking sector comprising a diversity of institutions to provide access to financial products and services to a diverse range of New Zealanders.