The Reserve Bank was yesterday officially handed the role of overseeing the finance company sector which, after 2 1/2 years of turmoil, has lost about half of its players of any scale and put almost 70 per cent of retail investors' funds at risk.
The Reserve Bank AmendmentBill No 3 was passed yesterday, giving the central bank regulatory oversight of non-bank deposit takers including finance companies, building societies and credit unions.
The move marked "a significant step forward in helping improve the future resilience of New Zealand's non-bank financial sector," Reserve Bank Governor Alan Bollard said.
In its new role, the Reserve Bank will require information from trustees of deposit takers, will develop and enforce minimum prudential and governance requirements and administer credit rating requirements.
In early 2006, KPMG estimated there were about 50 finance companies, but since then 26 have either been placed in receivership or otherwise defaulted on repayments to investors.
Reserve Bank data shows that as at June this year, the finance company sector had assets of $9.6 billion with $5.6 billion of that funded by money from households.
Of that household funding, 67.8 per cent was now impaired, being either tied up in companies in receivership or those that had frozen repayments to investors.
The new regulations are expected to take effect in 2010.
