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Deposit Takers Act 2023

Crisis management and resolution - Minister may give directions

349: When this subpart applies

You could also call this:

"When the government helps a bank in trouble using public money."

Illustration for Deposit Takers Act 2023

This part of the law applies if the Bank wants to use a special power to help a deposit taker that is in trouble. The Minister must think the Bank should use this power in a certain way. You need to know that public money is involved when the government spends money or makes promises to help the deposit taker. The government is involved if it spends money, gives a guarantee, or makes a promise to help the deposit taker. Public money is not involved if the Bank uses its own money, or if money is used from a special fund to help the deposit taker, or if the government gives grants or pays compensation to people who lost money.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS570655.

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348: Rules relating to subsidiaries do not apply, or

"Some rules about subsidiaries don't apply to the Reserve Bank's work."

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350: Minister may direct Bank relating to exercise of resolution power, or

"The Minister can instruct the Bank on how to use its special problem-solving powers."

Part 7Crisis management and resolution
Minister may give directions

349When this subpart applies

  1. This subpart applies if—

  2. either or both of the following apply:
    1. the Bank proposes to exercise a power under this Part in a particular manner in relation to a licensed deposit taker (A) that is in resolution:
      1. the Minister considers that the Bank should exercise a power under this Part in a particular manner in relation to A; and
      2. public money is involved in the resolution; and
        1. the Minister is satisfied that,—
          1. in the case of paragraph (a)(i), the exercise of the power in the manner referred to in that subparagraph would present a material risk to the prudent management of public money:
            1. in the case of paragraph (a)(ii), the exercise of the power in the manner referred to in that subparagraph would reduce a material risk to the prudent management of public money.

            2. In this subpart, public money is involved in a resolution if the Crown has done any of the following in connection with dealing with A’s financial distress or other difficulties:

            3. incurred expenses or capital expenditure or made a capital injection:
              1. given a guarantee or an indemnity:
                1. incurred a liability or made a commitment.

                    1. Example

                    Public money is involved in relation to a Crown guarantee or indemnity, a Crown loan, or a Crown acquisition of A’s shares.

                  1. However, public money is not involved in a resolution merely because—

                  2. the Bank uses its own financial resources in the resolution; or
                    1. money is applied under subpart 5 of Part 6 (use of the fund to support resolution actions); or
                      1. grants or advances are made under subpart 8 of Part 6 (deficiency in fund); or
                        1. compensation is paid under subpart 9 (compensation for pre-resolution creditors or shareholders that are worse off).