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Deposit Takers Act 2023

Depositor compensation scheme - Use of fund to support resolution

232: Maximum amount based on net amount of compensation payable in hypothetical liquidation

You could also call this:

"How to work out the maximum amount of money depositors can get back if a bank fails"

Illustration for Deposit Takers Act 2023

When the Minister makes a recommendation for regulations, they must do so based on advice from the Bank. The Bank can only give this advice if they are satisfied with a certain matter. You can find more information about this in section 231 and section 231(1)(b).

The Bank must be satisfied that the maximum amount of compensation is calculated based on two things. The first thing is the amount of compensation that eligible depositors would get if the deposit taker was liquidated, as outlined in subpart 3. The second thing is the amount that would be recovered, as outlined in subpart 4.

The Bank estimates these amounts to determine the maximum amount of compensation payable. They do this by subtracting the amount that would be recovered from the amount of compensation that would be paid. This calculation helps the Bank decide on the maximum amount of compensation.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS553336.

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231: Bank must calculate maximum amount, or

"Banks must work out the maximum amount of money you can get back if your bank fails."

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Part 6Depositor compensation scheme
Use of fund to support resolution

232Maximum amount based on net amount of compensation payable in hypothetical liquidation

  1. The Minister must make a recommendation for regulations for the purposes of section 231 only on the advice of the Bank.

  2. The Bank may give the advice only if the Bank is satisfied of the matter specified in subsection (4).

  3. The Bank must also be satisfied of the matter specified in subsection (4) if the Bank is acting under section 231(1)(b).

  4. The matter to be satisfied of is that the calculation of the maximum amount will be based on—

  5. the Bank’s estimate of the amount of compensation (if any) that would be paid to eligible depositors under subpart 3 in the event that a liquidation of the licensed deposit taker under New Zealand law had commenced immediately before it entered into resolution; less
    1. the Bank’s estimate of the amount that would be recovered under subpart 4 in that event.