The scheme, which was proposed two years ago, will begin in 2023 and will have a limit of $ 100,000 per depositor at each authorized institution. This is double the initial proposed limit of $ 50,000.

According to Finance Minister Grant Robertson, the increase in the limit, which will fully protect 93% of depositors, is the result of public comments. The source of the funds has not yet been specified, but this would likely involve withdrawals from the institutions concerned.

New Zealand is one of the few developed countries that does not have a deposit guarantee scheme, despite recommendations from the Organization for Economic Co-operation and Development and the International Monetary Fund.

The reception to the proposal has been mixed.

Adrian Orr, Governor of the Reserve Bank of New Zealand, hailed the move, describing it as an “important step” in strengthening the regulatory framework.

“This new law will broaden and clarify the scope of our role, which has evolved considerably since the Reserve Bank began prudentially regulating banks over 30 years ago. It is also modernizing our regulatory processes and instruments, ”said Orr.

“The reforms also provide important new enforcement tools that will help us manage emerging issues and an improved crisis management framework to effectively respond to any failure and minimize the impact on the financial system, economy and society. . “

Meanwhile, the opposition ACT party criticized the Deposit Takers Act, calling the move “moral hazard folly” that would have led to the global financial crisis.

“It’s the socialization of the bank,” said David Seymour, CEO of ACT. “The finance minister says that 93% of bank customers don’t care about the stability of banks because the taxpayer will bail them out.”

According to Seymour, deposit insurance shifts the responsibility for risk-taking from banks to the Kiwi taxpayer, which he says will lead to greater instability in the financial system.