Plain language law

New Zealand law explained for everyone

Deposit Takers Act 2023

Regulation of deposit takers - Standards - Subject matter of standards

82: Lending and other exposures

You could also call this:

"Rules for when businesses lend money to people"

Illustration for Deposit Takers Act 2023

A standard can regulate how deposit takers lend money and manage risks. You need to know that this includes loan concentration and risk exposures. A deposit taker's business of lending money is also covered, and this is called a lending standard.

A lending standard can specify criteria that deposit takers must use when deciding if someone qualifies for a loan. This can include income-based criteria or asset-based criteria. You can think of criteria like debt-to-income ratios or loan-to-value ratios.

A standard can also regulate how deposit takers deal with related parties, such as family members or other businesses they are connected to. This can include requiring transactions to be fair and transparent, monitoring these transactions, and managing any risks that come with them. A lending standard may also require deposit takers to report on how they are meeting the requirements of the standard.

In this context, lending means providing credit under credit contracts, as defined in clause 1 of Schedule 2. A standard can define what a related party is, and this definition is used when talking about exposures to related parties.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

This page was last updated on

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS579792.

Topics:
Money and consumer rights > Banking and loansBusiness > Industry rules
Previous

81: Fit and proper persons, or

"Who can be a boss of a deposit taker: being honest and good at your job"

Next

83: Classes of lending must be prescribed by regulations, or

"Lending rules must fit into categories decided by the government."

Part 3Regulation of deposit takers
Standards: Subject matter of standards

82Lending and other exposures

  1. A standard may regulate, deal with, or otherwise relate to 1 or more of the following matters:

  2. loan concentration and risk exposures:
    1. a deposit taker’s business of lending money (a lending standard):
      1. exposures to related parties of a deposit taker, including any of the following matters:
        1. requiring transactions between a deposit taker and any related party to be entered into only on a particular basis (for example, on arm’s-length terms):
          1. monitoring transactions between a deposit taker and any related party:
            1. managing risks arising from exposures to any related party:
              1. writing-off exposures to any related party:
                1. any other limits or restrictions on exposures to related parties.

                2. A lending standard may specify income-based criteria, asset-based criteria, or any other criteria that must be applied by a deposit taker (or non-deposit-taking lender) when determining whether a person qualifies for a loan or the provision of any other credit.

                  Examples of criteria

                  The types of criteria that may be specified include debt-to-income ratios and loan-to-value ratios.

                3. A lending standard may impose reporting requirements in connection with the other requirements of the standard.

                4. A standard may define related party for the purposes of subsection (1)(c).

                5. In this subpart, lending means providing credit under credit contracts (within the meaning of clause 1 of Schedule 2).