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Deposit Takers Act 2023

Regulation of deposit takers - Standards - Subject matter of standards

89: Contingency and recovery plans and facilitating resolution under Part 7

You could also call this:

"Plans to help banks recover if something goes wrong"

Illustration for Deposit Takers Act 2023

A standard is like a set of rules that deposit takers, such as banks, must follow. You need to know that these rules can include plans for what to do in case something goes wrong, like a bank failing. These plans are called contingency and recovery plans, and they help the bank get back on its feet.

The rules can say what these plans should include, such as what scenarios they should cover and who is responsible for putting them into action. They can also say how the plans should be reviewed and updated, and what to do if the bank needs to make changes to them. If a bank is in trouble, it may need to activate its contingency and recovery plans, and the rules can say how this should be done.

The rules can also help make sure that if a bank is in trouble, it can be sorted out in an orderly way, without causing too much disruption to its customers. This can include making sure the bank has the right systems and processes in place to deal with any problems that arise, and that it has a plan for how to implement these systems and processes. You can find more information about this in subparts 4 to 8 of Part 7 and section 259.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS579797.

Topics:
Money and consumer rights > Banking and loansBusiness > Industry rules
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Part 3Regulation of deposit takers
Standards: Subject matter of standards

89Contingency and recovery plans and facilitating resolution under Part 7

  1. A standard may regulate, deal with, or otherwise relate to contingency and recovery plans, including 1 or more of the following matters:

  2. the purposes for which a deposit taker must have those plans (for example, to ensure that a deposit taker is reasonably prepared in the event of a resolution under subparts 4 to 8 of Part 7):
    1. the contents of those plans, for example, the scenarios the plans must cover and the strategies and methods that must be included in the plans for dealing with those scenarios:
      1. the persons responsible for maintaining, activating, or implementing those plans:
        1. the notifying of the Bank of the activation of those plans:
          1. the arrangements for activating and implementing those plans (for example, obtaining necessary human, technological, financial, and other resources):
            1. the reviewing, updating, or testing of those plans:
              1. the changing of those plans (including when the Bank requires a change to be made).

                1. A standard may regulate, deal with, or otherwise relate to any matters to ensure that, in the event of a resolution under subparts 4 to 8 of Part 7, the resolution can be carried out in an orderly manner and otherwise in accordance with the purposes set out in section 259, including requirements in connection with the following:

                2. the deposit taker having appropriate capacity and capability to help ensure that any financial distress or other difficulties that may occur are dealt with in an orderly manner (for example, having appropriate policies, processes, controls, or other arrangements in place):
                  1. an implementation plan in connection with the matters referred to in paragraph (a):
                    1. a regular process to test the matters referred to in paragraph (a).

                        1. Examples

                        A standard may require a bank (A) to have mechanisms in place ahead of a bank failure for the purpose of ensuring that A’s customers have some continued access to liquidity and banking services (in particular, mechanisms to enable customers to quickly access their transactional account to a certain extent after A enters resolution).

                        A’s business has 3 main parts: residential property lending, rural lending, and other business lending.

                        A standard may require A to arrange its operations to enable those parts to be efficiently restructured or separated out if A enters resolution. See the example in section 319, which shows how the Bank’s disposal power in a resolution may be exercised to separate out those parts.