Finance Minister Bill English. Photo / Rotorua Daily Post
The Government retail deposit guarantee scheme will be extended in revised form until December 31, 2011.
The current scheme ends on October 12 next year and Finance Minister Bill English said today the extended scheme would include some changes.
The scheme would become voluntary and higher fees would be charged
for lower credit ratings.
Those with a lower rating than BB would not qualify.
The maximum deposit per person would also reduce from $1 million to $500,000 and $250,000 per non-bank deposit.
English said the planned extension would help maintain confidence in New Zealand financial institutions while achieving an orderly exit from the scheme.
The deposit guarantee scheme was put in place last year to give New Zealand depositors confidence that their money would be secure in the event of an approved financial institution failing.
English said the transition would run along side the Reserve Bank's new regulatory regime for non-bank financial institutions, which requires all finance companies with more than $20 million in assets to get credit ratings.
The changes and the notice given would allow for an orderly transition.
"Some institutions may choose not to apply for the extended scheme and some won't meet the application criteria," said English.
"Whether or not the they are covered beyond that date will depend upon whether their institutions joins the new scheme. Participation in the new scheme will be voluntary."
English said the Government had paid out $68 million to cover guaranteed deposits, but did not say how much money had been raised from the fees charged to banks.
The changes would be legislated for and English did not envisage any extension past the end of 2011.
The wholesale deposit guarantee, which banks use to attract large loans for their lending, was still being used by banks, but English believed this would wind down over time as banks no longer needed it.
He believed the "high stress" point of the financial crisis had passed but there would still be shocks and surprises as the world economy overcame the massive loss of capital over the past year.
All countries were facing common problems and it was important there was a global response to the issues raised by the crisis.
The decisions today largely aligned policy with that of Australia, said English.
- NZPA
