NZ could become the last developed country to enact deposit insurance rules

Green Party co-leader James Shaw has been lobbying for a deposit insurance in New Zealand for Years photo / Mark Mitchell

A Government mandated insurance for bank deposits could soon be a reality for Kiwis.

But Finance Minister Grant Robertson wants to wait for the public to have its say, before committing to implementing the rules.

This morning, the Reserve Bank and the Treasury called for public submissions on potential changes to the way New Zealand's Central Bank operates.

One of the major areas of focus during the consultation period is around the question: Should there be depositor protection in New Zealand?

"Almost all other advanced countries have arrangements to protect depositors from loss if their bank fails," the consultation document said.

Deposit protection would likely come in the form of a deposit insurance scheme – whereby consumers' bank deposits would be insured, up to a certain limit, in the event a bank fails.

This is an idea the Green Party has been keen on for years.

In fact, Co-Leader James Shaw said the question about deposit insurance was in the consultation document because of his party's lobbying.

He said it is an important area to explore, given the fact financial systems can often be unpredictable.

"Now Israel has a deposit insurance scheme, we're the only [developed country] now that doesn't have one."

Before the election, the Greens had a deposit insurance policy whereby consumers would pay $5-$10 a year to be insured by up to $250,000.

The International Monetary Fund (IMF) had also recommended New Zealand adopts such a scheme.

In a report on New Zealand's financial stability last year, the IMF said to enhance New Zealand's credibility and strengthen the financial safety net, "the introduction of deposit insurance would be the best option".

Shaw said if the consolation document comes back with a lot of support for a deposit insurance, it should be made law.

Finance Minister Grant Robertson said it's important to wait until the end of the consultation period has ended before committing to new rules.

"The Government has no position on it at this point; the reason for the consultation is to see where it will end up."

If the report does find the idea has wide-ranging support, he said the Government would "seriously consider it".

In 2013, when Labour was in Opposition, its then Finance Spokesman David Parker promised a Labour-led Government would ensure the first $30,000 of all bank deposits would be protected.

"The cost of that guarantee must be borne by the banking system, meaning it would be a cost paid by banks that did not fail," Parker said in a press release.