Thursday, May 23, 2024

New consultation on Depositor Compensation Scheme funding opens

The Treasury has opened the second round of public consultation on the funding strategy for the Depositor Compensation Scheme (DCS), known as the Statement of Funding Approach (SoFA).

The DCS will be established by the Deposit Takers Act 2023 and will compensate up to $100,000 for each depositor per licensed deposit taker in the unlikely event a deposit taker fails.

Te Tai Ōhanga says the second stage of consultation communicates the implications of targeting a 0.8% fund of protected deposits built over 20 years and seeks feedback on outstanding issues of a more operational and technical nature, including:

  • expectations for how future SoFA documents would be adapted when fund targets are met and/or the DCS fund is drawn on (in response to feedback from the first consultation);
  • estimates of the costs associated with the DCS, including updated estimates of the cost of a failure event and information on expected establishment costs, and business as usual running costs;
  • the investment objectives and authorised asset classes that should apply when investing the DCS fund;
  • the proposed approach to implementing the Crown backstop, including how the cost to the Crown of providing liquidity to the DCS will be covered through levies.

The consultation document and details on how to make a submission are available on the Treasury website: https://www.treasury.govt.nz/publications/consultation/second-stage-consultation-statement-funding-approach-funding-strategy-depositor-compensation-scheme

Consultation is open from 6 May to 31 May 2024. The Treasury will use submissions to help inform the creation of the first SoFA, to be published by the Minister of Finance.

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