Wednesday, February 28, 2024

Treasury opens consultation on Depositor Compensation Scheme funding

Te Tai Ōhanga – The Treasury is seeking views on the funding strategy for the Depositor Compensation Scheme (DCS) that will be established by the Deposit Takers Act 2023.

The DCS will compensate up to $100,000 for each depositor per licensed deposit taker in the unlikely event a deposit taker fails.

The funding strategy for the DCS will be guided by a Statement of Funding Approach published by the Minister of Finance.

The first consultation focusses on the approach to building the DCS fund, the estimated costs of the fund, determining a target size of the DCS fund (if any), and a timeframe for reaching any target.

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

Consultation is open from 31 July until 25 September. The Treasury will use submissions to help inform the creation of a draft Statement of Funding Approach (SoFA) required under the Deposit Takers Act 2023 and hold a second round of consultation on the draft and operational aspects of the SoFA in early 2024.

Te Pūtea Matua – Reserve Bank of New Zealand is also consulting on the related matter of the levy framework for the DCS from 31 July to 25 September (see the Reserve Bank website).

The Treasury’s consultation covers the overall costs of the DCS that are to be recovered by a levy on deposit takers, while the Reserve Bank’s consultation focuses on how the DCS’s costs are to be allocated amongst deposit takers. 

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