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Deposit Takers Act 2023

Crisis management and resolution - Resolution of licensed deposit takers and associated persons

281: Grounds on which associated person may be declared to be in resolution

You could also call this:

"When can someone linked to a bank be put into resolution to fix problems?"

Illustration for Deposit Takers Act 2023

The Bank can recommend that a person or company associated with a licensed deposit taker be put into resolution. This happens if the Bank believes certain things are true. You need to understand that the Bank must be satisfied that one or more specific matters apply to the associated person. The Bank also needs to think that these matters cannot be fixed in a timely and orderly way without putting the associated person into resolution.

The Bank looks at things like whether the associated person has broken any rules or directions under this Act. You should know that the Bank considers if the associated person's business is closely connected to the licensed deposit taker. The Bank thinks about whether the associated person's situation might harm the licensed deposit taker's ability to comply with important rules or stay solvent.

The Bank checks if the associated person's affairs are being run in a way that might harm the licensed deposit taker. This includes looking at whether the associated person's situation might affect the licensed deposit taker's solvency or ability to comply with important rules. The Bank makes decisions based on what is said in section 274.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS530462.

Topics:
Money and consumer rights > Banking and loansBusiness > Industry rules
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280: Grounds on which licensed deposit taker may be declared to be in resolution, or

"When a bank gets into financial trouble and can't pay its debts, it can be taken over to fix the problem."

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282: End of resolution, or

"When a bank is no longer in trouble and its problems are solved, that's the end of resolution."

Part 7Crisis management and resolution
Resolution of licensed deposit takers and associated persons

281Grounds on which associated person may be declared to be in resolution

  1. The Bank may make a recommendation under section 274 in respect of an associated person (B) of a licensed deposit taker (A) if the Bank—

  2. is satisfied on reasonable grounds that 1 or more of the matters set out in subsection (2) apply; and
    1. is satisfied that there is no reasonable prospect of the matters that apply under paragraph (a) being adequately dealt with to the Bank’s satisfaction in a timely and orderly way other than through resolution.

      1. The matters are as follows:

      2. B has contravened, or is contravening, any direction or other requirement imposed by or under this Act or the regulations:
        1. A’s business and affairs are so closely connected with B that the Bank will be unable to exercise effectively the powers conferred by this Part in relation to A unless B is in resolution:
          1. the circumstances of B are such as to be prejudicial to—
            1. A’s solvency; or
              1. A’s ability to comply with a prudential obligation in a material respect:
              2. B’s affairs are being conducted in a manner prejudicial to—
                1. A’s solvency; or
                  1. A’s ability to comply with a prudential obligation in a material respect.