Reserve Bank of New Zealand Regulatory Impact Statement: DCS Transitional Standard

Ref #22471634 v1.0 Regulatory Impact Statement: DCS transitional standard Decision sought To release a Standard requiring a deposit taker to pre-position a webpage for authorised individuals to provide alternate account details in the event of the deposit takers failure. Agency responsible Reserve Bank of New Zealand Date finalised 23 April 2025 In the event of a deposit taker’s failure that requires a payment to depositors from the Depositor Compensation Scheme (DCS) the Reserve Bank will need to collect alternate bank account details, and preferably contact details, in order to facilitate payment. This Regulatory Impact Statement (RIS) considers different methods of collecting this information and recommends a dual process of prepositioning a DCS depositor page on a deposit takers’ internet banking and a portal run by the Reserve Bank. Operating a DCS depositor page requires the issue of a Standard (secondary legislation) so is the focus of the implementation section of this RIS whereas the Reserve Bank portal can be done without regulatory change. Summary: Problem definition and options What is the policy problem? Legislation establishing the DCS was enacted in the DTA in 2023 with its commencement on 1 July 2025 being well publicised. In order to make payments to depositors in the event of a deposit taker failure the DCS requires a credible payment mechanism to support the financial stability of the deposit taking sector and the wider economy. Following consultation with the deposit taking sector there are limited options and widespread support for a deposit taker website through each deposit takers internet banking platforms. To ensure a consistent uptake of this option by the 1 July 2025 go-live date of the DCS, and the corresponding financial stability benefits from such an approach, regulatory intervention is required What is the policy objective? The intended outcome is that, by the 1 July 2025 go-live date, the Reserve Bank, deposit takers and depositors are confident that a credible payment mechanism is operational. This will support the purpose of the Deposit Takers Act, and the DCS, which is protecting and promoting the stability of the financial system. Compliance with the standard will be maintained by Reserve Bank supervisors and Trustees consistent with other requirements. A deposit taker that complies with the standard will have a credible mechanism to collect alternate bank accounts from its depositors.

2 Ref #22471634 v1.0 What policy options have been considered, including any alternatives to regulation? The primary options considered are a deposit taker website and a Reserve Bank portal. The preferred option is a combination of both options. Earlier in the policy development process a number of other options were considered but these were rejected as unfeasible particularly following consultation with the industry. This included payment via cheque, allocating all depositors to a new deposit taker, setting up new accounts at the failed deposit taker or making payments through another government agency. What consultation has been undertaken? The deposit taking sector has been engaged throughout the development process and their input was crucial in narrowing the feasible options to a deposit taker portal or a Reserve Bank portal. Following this a public consultation paper and exposure draft of the Transitional Standard were released on 6 December 2024 with consultation open until 7 February 2025. Written submissions were received from seven deposit takers and three industry associations. We have also discussed with a large number of deposit takers both to refine the content of the standard and to support them to be ready to comply with the standard. Deposit takers have been supportive of a deposit taker portal as a lower cost method that can be achieved in the required timeframes. A number of deposit takers are intending to propose using the alternate model within the Transitional Standard and we have been supporting them to develop these proposals. Summary: Reserve Bank’s preferred option Costs (Core information) Outline the key monetised and non-monetised costs, where those costs fall (e.g. what people or organisations, or environments), and the nature of those impacts (e.g. direct or indirect) The costs considered for both portals are system and other costs for deposit takers to build and operate systems to collect alternate account details, costs of depositors to provide the information including to verify themselves (to the extent they can’t do this using existing credentials). Costs to the Reserve Bank are to build and operate equivalent systems with the Reserve Bank’s costs being borne by deposit takers over time through levies charged on the DCS. The RIS for the Depositor Compensation Scheme Regulations1 identified that “there remains a limitation in our understanding of the extent that deposit takers will pass on the cost of levies to their customers through deposit rates and other fees.” Levies are very small2 as a proportion of total turnover and the proportion of levies directed to cover Reserve Bank costs to operate the DCS will be a very small proportion of that. There will be little impact of these costs on competition. Larger deposit takers are likely to have more complex systems that are more costly to comply with the Transitional Standard; however, they are also likely to have more resources to meet these costs. Costs on smaller deposit takers will be partially mitigated where they can apply an alternate model. 1 https://www.regulation.govt.nz/assets/RIS-Documents/Regulatory-Impact-Statement-Depositor￾Compensation-Scheme-Regulations.pdf Page 5 2 Between 0.00053 and 0.00158 of protected deposits as set by regulation 19(1) of the Deposit Takers Regulations 2025.

3 Ref #22471634 v1.0 Benefits (Core information) Outline the key monetised and non-monetised benefits, where those benefits fall (e.g. what people or organisations, or environments), and the nature of those impacts (e.g. direct or indirect) The counterfactual – where there is no response to arrange a DCS payment in the event of a deposit taker failure – is not a credible payment mechanism. The benefit is DCS payments if required can be provided to depositors as soon as is practicable. Depositors will therefore be able to rely on the DCS as a contributor to financial stability as well as the competition benefits. Balance of benefits and costs (Core information) Does the RIS indicate that the benefits of the Minister’s preferred option are likely to outweigh the costs? The benefits of this proposal outweigh the costs. Without a response the DCS cannot credibly operate. The deposit taking sector is supportive of the proposals which have been developed with their cooperation as the most cost-effective option that can be implemented in the time available. There will be additional costs in 2028 to comply with the complete DCS Standard; however, these costs are not within consideration for this policy. The costs to comply with the 2025 Transitional Standard will largely be one-off whereas the benefits of having a credible DCS payment mechanism will continue indefinitely. Implementation How will the proposal be implemented, who will implement it, and what are the risks? As a standard, deposit takers will be responsible for continued compliance and this will be monitored by Reserve Bank supervisors and trustees (for NBDTs) consistent with their obligations under other requirements. The Reserve Bank will be responsible for both design and operation of the RBNZ portal as well as the systems to receive information from deposit takers, including that obtained through the deposit takers DCS depositor page, which will be used to calculate and make DCS payments if required to do so. This risk is that deposit takers will not have a DCS depositor page and related systems pre￾positioned by go-live on 1 July 2025. We have attempted to mitigate this risk by significantly reducing the requirements for information required and being more flexible on how data can be stored and transmitted to the Reserve Bank. The ability to propose an alternate model will also assist deposit takers who cannot comply with the general requirements of the Transitional Standard. Limitations and Constraints on Analysis Our analysis is constrained by the timing for the issuance of the Standard before 1 July 2025. Due to the need for the sector to have sufficient certainty to deliver changes, this further compounds the timing limitations. Overall, the primary impact of these limitations is to narrow the options available to those that can be delivered within the short timeframes available. Our analysis is also shaped by the statutory framework, in particular the need for the Reserve Bank to operate in accordance with the statutory purposes and principles, and to give regard to the Financial Policy Remit issued by the Minister of Finance. The costs to a deposit taker of developing a DCS depositor page are commercially sensitive; however, are not expected to be in the hundreds of thousands or millions of dollars and are low cost compared to the alternative options. We have discussed the proportion of depositors who have internet or mobile access with individual depositor takers but have not prepared an overall industry figure. Within the group that have internet access there will also be a group that have been provided access but have not used this in a significant time, if ever, which means they may not be able to access it in

4 Ref #22471634 v1.0 the event of a deposit taker failure. However, we expect that approximately 80% of the customers of Group 1 deposit takers would be able to access an online facility with their deposit taker. The proportion of customers of smaller deposit takers may be lower and is likely to vary significantly depending on their depositor demographics and other features. This means that the preferred option will leave responsibility for collecting information from the vast majority of customers with the deposit takers. I have read the Regulatory Impact Statement and I am satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impact of the preferred option. Responsible Manager(s) signature: Annette Crequer Manager, Regulatory and Policy Stewardship 23 April 2025 Quality Assurance Statement Reviewing Agency: RBNZ QA rating: Meets Panel Comment: James Sergeant, Acting Manager, External Stakeholders, has reviewed the Regulatory Impact Statement prepared by the RBNZ on 23 April 2025. The information and analysis summarised in the RIS meets the Quality Assurance Criteria. There has been good consultation with stakeholders on the options considered and although there are no figures on the costs of the proposal, there is sufficient background information to support the preferred option.

5 Ref #22471634 v1.0 Purpose of the Regulatory Impact Statement Under sections 255-257 of the Reserve Bank of New Zealand Act 2021, we must assess the expected regulatory impacts of any proposed policy. Section 256 sets out the content of that assessment, which we have included in this document; although the order follows the Ministry for Regulation template: • An outline of the problem or issue that the policy is intended to address (Section 1, paragraphs 4-5) • The objectives of the policy (Section 1, paragraphs 10-12) • An evaluation of the costs and benefits of the policy (Section 2, from paragraph 46) • An evaluation of alternative means of achieving the objectives of the policy (Section 2, paragraphs 26-42) • A statement of the Bank’s proposed approach to monitoring and evaluating the effectiveness of the policy (Section 3) • A statement that explains how the Reserve Bank Board has had regard to the Financial Policy Remit in preparing the proposed policy (Section 2, paragraphs 20-24) • A description of any consultation or other engagement the Bank has had with interested persons in relation to the policy and an explanation of how the Bank has had regard to any views expressed (Section 1, paragraphs 13-17). Section 1: Diagnosing the policy problem What is the context behind the policy problem and how is the status quo expected to develop?

1. As part of the review of the Reserve Bank legislation, Parliament passed the Deposit Takers Act 2023 (DTA). The DTA integrates the prudential regimes for both Banks and Non-Bank Deposit Takers into a single prudential framework and is intended to modernise the regulatory framework for the prudential regulation of deposit takers.
2. The DTA also creates the Depositor Compensation Scheme (DCS) which provides compensation of protected deposits of up to $100,000 per eligible depositor per deposit taker in the event of a failure. The DCS needs to have a credible mechanism to make compensation payments, when required, in a timely manner to eligible depositors.
3. Depositor compensation supports financial stability by giving depositors confidence that their deposits are protected and therefore reducing the likelihood of bank runs3 , and by ensuring that in the event of a deposit taker failure, depositors are compensated in a timely manner and therefore experience minimal disruption to their affairs. Depositor Compensation also supports competition by aligning default risk of larger deposit takers with their smaller competitors for each eligible depositor’s first $100,000. 3 Where a large number of depositors attempt to simultaneously withdraw their deposits due to concerns about the stability of the deposit taker and therefore significantly increase the risk of deposit taker failure.

6 Ref #22471634 v1.0 4. The Reserve Bank, in consultation with the deposit taking sector, has settled on a process that requires collecting alternate bank account details for depositors to make payments. Two alternative processes have been proposed for collecting these details, which allows flexibility to determine the most appropriate approach depending on the details of the deposit taker and its depositors. These options are to collect account details through either a Reserve Bank web portal or a webpage within the deposit taker’s internet banking offering. The focus of the relevant sections of this RIS is on the webpage option, as the Reserve Bank web portal can be developed without any regulatory changes. How is the status quo expected to develop? 5. Legislation establishing the DCS was enacted on 6 July 2023. 4 Commencement Orders have been made which will bring it into force on 1 July 2025.5 This has been well publicised.6 6. A robust payment mechanism is required to ensure that the DCS is credible and can support financial stability and competition. The webpage payment option requires a standard7 to ensure that deposit takers undertake the work to build the prepositioned webpage. In the absence of any regulatory change, only the RBNZ portal would be available from 1 July 2025. However, this option is not expected to be efficient and appropriate for all deposit takers8 and so the DCS would lack a credible payment mechanism for some deposit takers. In turn, this could undermine the effectiveness of the DCS in supporting financial stability and competition. What is the policy problem or opportunity? 7. As noted above, a robust payment mechanism is required to ensure that the DCS is credible. The DCS supports financial stability by assuring depositors that they would be compensated in the event of a deposit taker failure and therefore reducing the risk to depositors (and also by mitigating the impacts of a deposit taker failure on the wider economy). 8. For this benefit to materialise, the payment mechanism must be able to provide access to funds as soon as practicable. This requires the Reserve Bank to collect alternate account details, and preferably contact details, in a timely manner and also using secure verification that minimises the chance of fraudulent or incorrect account details being supplied. The large number of depositors at any deposit taker, and particularly larger deposit takers, supports this process being automated as much as possible. 4 Part 6 of the Deposit Takers Act 2023 5 Deposit Takers Regulations 2025 and Deposit Takers Act Commencement Order 2025 6 See for example, Protecting your money with the Depositor Compensation Scheme - Reserve Bank of New Zealand - Te Pūtea Matua 7 A standard is secondary legislation that provides additional requirements on deposit takers above those imposed by primary legislation. These are issued by the Reserve Bank under section 72 of the DTA. 8 For example, due to the additional steps to verify the identity of depositors to the RBNZ portal compared with this step already being achieved through a deposit taker’s internet banking platform.

7 Ref #22471634 v1.0 9. The policy issue therefore is ensuring that there are credible payment options for all deposit takers ahead of the introduction of the DCS. What objectives are sought in relation to the problem? 10. The objectives sought are set out in the Deposit Takers Act 2023 and the Financial Policy Remit. Of particular importance is the purpose of the DTA9 and the DCS10, which is protecting and promoting the stability of the financial system. 11. Other principles and objectives11 that are particularly important to the policy decisions in this RIS are: • Taking a proportionate approach to regulation and supervision (s 4(a)(i)) • Maintaining competition within the deposit-taking sector (s 4(b)) • Avoiding unnecessary compliance costs (s 4(c)) 12. Relevant objectives derived from the Financial Policy Remit12 are: • Regulatory settings should enable competition from growth of smaller players by seeking a proportionate approach to regulation. • Failures of institutions should be managed in a manner that minimises disruption to the financial system and broader economy. • Supporting an innovative regulatory system. What consultation has been undertaken? 13. We have developed and refined the preferred payout solutions with industry. Following several rounds of discussion we have settled on the preferred approach, combining two solutions as the most desirable option. 14. A consultation paper and exposure draft of the Transitional Standard was released on 6 December 2024, for feedback by 7 February 2025. We have evaluated submissions and met with many deposit takers both to address their questions in order to develop the final Standard and to support their future compliance with the Standard. A summary of submissions paper will be publicly released alongside the Standard. 15. As well as submissions on a number of technical issues within the exposure draft, that are consistent with the policy intent, the submissions resulted in policy changes in two areas which are covered in the following paragraphs. 16. A small number of deposit takers have made clear to us that additional time would be required to implement a DCS depositor page for mobile applications. For deposit takers that offer both an internet banking website and a mobile banking application, the Transitional Standard will provide that the internet banking website is required to have a DCS depositor page by 1 July 2025, but the same requirement will only apply to their mobile banking application only from 1 January 2026 (6 months later). 9 Section 3 of the DTA – Purposes 10 Section 190 of the DTA - Additional purpose of this Part 11 Section 4 of the DTA – Principles to be taken into account under this Act 12 The December 2024 Financial Policy Remit is available at the Reserve Bank Website here

8 Ref #22471634 v1.0 17. The exposure draft included the ability for Reserve Bank to approve an alternate model for deposit takers who would be unable to pre-position a DCS depositor page. This has been retained. However, two additional features have been incorporated: • The alternate model may be limited to some account software rather than requiring it apply to all. For example, a large deposit taker may have a legacy business banking platform available to a limited number of depositors that cannot incorporate a DCS depositor page, but it is able to comply with the standard for the majority of its depositors. • The alternate model in the exposure draft provided six criteria that must be met for the model to be approved. This has been altered to six criteria that the Reserve Bank must take into account when deciding whether it is reasonably satisfied to approve a model. This will provide flexibility for the Reserve Bank to approve a model where not all criteria have been met but the deposit taker has provided a suitable explanation why their proposal is appropriate. Section 2: Assessing options to address the policy problem What criteria will be used to compare options to the status quo? 18. The criteria we have used to assess the options are derived from the purposes and principles in the DTA, and the Financial Policy Remit. We consider that some of the objectives identified above are better reflected in the design of the preferred solution rather than used as evaluative criteria. 19. The criteria we have used to evaluate the options are: • Supporting financial stability • Facilitating a quick and efficient DCS payment • Avoiding unnecessary compliance costs Financial Policy Remit 20. We have had regard to the December 2024 Financial Policy Remit when formulating this policy. 21. The proposed policy will support competition by supporting facilitation of a payment, when required, as soon as practicable and therefore aligning default risk, up to $100,000 per eligible depositor, across deposit takers. 22. We consider that the proposed policy is consistent with the Government expectation that failures of institutions should be managed in a manner that minimises disruption to the financial system and broader economy. 23. We also consider that the Standard specifically supports an innovative regulatory system by accommodating flexibility in the specific solution by allowing deposit takers to propose an alternate approach.

9 Ref #22471634 v1.0 24. We consider that the matters related to financial inclusion are not particularly relevant to this Standard. What scope will options be considered within? 25. As noted above the options will be considered within the scope of the purposes and principles of the DTA, while also having regard to the Financial Policy Remit. The options are further constrained by the time available to develop and issue the standard and the capacity of the sector to implement the policy ahead of the DCS go-live on 1 July 2025. What options are being considered? 26. Six payment options were initially explored but, following engagement with the sector, only two of these have been considered sufficiently viable to be analysed in greater detail. Although a Reserve Bank portal can be implemented without regulatory change it is still a significant operational change so has been considered as a separate option rather than being consolidated into the Status Quo. The analysed options have been evaluated against the Status Quo of doing nothing, despite considering that this is not a viable option. Option One – Status quo 27. The Reserve Bank would not implement any systems or requirements for collecting alternate bank accounts or facilitating a DCS payment in the event of a deposit taker failure. This would minimise compliance costs ahead of a deposit taker failure; however, it would leave the DCS practically inoperable so is not considered a viable option. Option Two – Deposit taker portal 28. This option would require the Reserve Bank to issue a standard that required all deposit takers to pre-position a portal that would be activated in the event of that deposit takers failure. This portal would collect information from depositors who had internet access to the deposit taker to manage their accounts before the deposit takers failure. The portal would not provide access to depositors who did not have internet access prior to the deposit taker’s failure due to the large number of depositors that would require onboarding, including those that did not regularly use the internet for other purposes, and the limited availability of staff following that deposit takers failure. 29. If a depositor did not have internet access to the deposit taker this option would not directly address how the depositor would provide their alternate account information. The standard could include additional methods for the deposit taker to obtain this information, but this is likely to have high compliance costs for the deposit taker and/or the depositor. 30. We have considered non-regulatory options and concluded that these would not offer sufficient certainty that the prepositioning work would occur before the beginning of the DCS. We have also considered alternative regulatory instruments and consider that these could not be in force before the DCS go-live on 1 July 2025. 31. Smaller deposit takers who do not offer the ability for depositors to manage their deposits via internet banking would not be required to comply with the transitional standard to implement a DCS depositor page due to the disproportionate requirement to undertake this development. However, these deposit takers would still be required

10 Ref #22471634 v1.0 to have mechanisms to hold or collect the necessary information in the event of their failure. Option Three – RBNZ portal 32. This option would involve the Reserve Bank activating its own portal upon the failure of a deposit taker. This portal would require a mechanism to verify the identity of depositors, such as RealMe13, and collect alternate account details similar to those provided in option two. 33. As this would only impose obligations on the Reserve Bank and is consistent with existing powers it would not require a regulatory response. As noted above, due to the significant operational changes required to implement this option it has been considered as an option in itself rather than as part of the Status Quo. Option Four – Dual deposit taker and RBNZ portals 34. This option would be a combination of options two and three. The Reserve Bank would retain the option whether to use either or both of these portals in the event of a specific deposit taker failure. Rejected options 35. Alternative options that were considered and rejected were: Payment via cheque 36. Other countries make payments on their equivalent of the DCS by a cheque which removes the requirement for their DCS equivalent to know depositors’ alternate account details. However, New Zealand banks withdrew the availability of cheques in 202114 and this was not considered a viable option for the DCS. Via an appointed deposit taker(s) 37. An eligible depositor would be notified their deposit taker had failed and their compensation was available in an account they already had at another deposit taker or an account at that deposit taker that would be opened for them once their identity had been verified. Due to the number of potential depositors this may require more than one deposit taker; however, the number of new depositors at any appointed deposit taker would necessarily also be large; and may occur at a time of heightened financial stress within the deposit taking sector generally. 38. This was rejected as non-viable following consultation with deposit takers that would be required to onboard these depositors following the failure of another deposit taker. Account 99 39. This would allow depositors to continue to access funds on day one from an account with a 99 suffix at their deposit taker while they organise a new account at a different deposit taker. 13 RealMe is a secure login service that lets people access online services from government departments using a single username and password. 14 https://bankomb.org.nz/guides-and-cases/quick-guides/payment-systems/cheques

11 Ref #22471634 v1.0 40. This was rejected as a deposit taker in liquidation is likely to be suspended from the retail and high value payment systems. The deposit taker is unlikely to retain staff once in liquidation and could not perform business actions. From a consumer point of view, the depositor is unlikely to want to retain their money in a failed deposit taker. Government agency 41. This would use the systems of another government agency, such as Inland Revenue or the Ministry of Social Development who have previously undertaken payments at short notice such as cost-of-living or COVID 19 wage subsidy payments. 42. This was rejected as it would require bespoke modules to be designed and added to systems of that other agency and creates an additional layer of responsibility without mitigating risks involved with calculating entitlements and validation of claims.

12 Ref #22471634 v1.0 How do the options compare to the status quo/counterfactual? Option One – Status Quo Option Two – Deposit Taker Portal Option Three – RBNZ portal Option Four – Dual Deposit Taker and RBNZ portals Supporting financial stability 0

• Can collect information from the majority of depositors but can leave sections of the depositor base unsupported and this can vary significantly across different deposit takers
• Will allow all depositors to provide alternate accounts, although some may have difficulty in doing so ++ Provides the easiest method for the majority of depositors to provide the necessary information to ensure a credible DCS Facilitating quick and efficient DCS payment 0
• This will support a quick payment for those who can access the deposit taker portal but will provide no support, and consequently cause delays, for those who can’t.
• This is likely to result in delays due to large number of depositors struggling to verify their identity ++ Allows for a relatively quick payment in the event of a failure taking into account depositors’ individual circumstances Avoiding unnecessary compliance costs 0
• relatively low costs for deposit takers to implement but potentially high compliance costs for unsupported depositors
• Minimal additional costs on deposit takers but increases costs on depositors who need to verify their identify with the portal instead of using existing verification with their deposit taker ++ Relatively low cost for deposit takers and minimises the number of depositors who need to verify their identify through a new channel Overall assessment 0 + + ++

Ref #22471634 v1.0 IN CONFIDENCE What option is likely to best address the problem, meet the policy objectives, and deliver the highest net benefits? 43. We consider that option four is the most likely to best address the problem and meet the policy objectives. Engagement with deposit takers on payout options has left it as the most viable option. A large number of alternatives have been rejected as non-viable or infeasible. 44. We have settled on the use of both the deposit taker’s website and the RBNZ portal. The combination of these two collection and payment solutions mitigates the limitations of either and gives more flexibility for a payment to occur depending on the specific facts of the failure. Our analysis has indicated that either solution alone would not be sufficient to allow for an efficient payment, if required, for every deposit taker from 1 July 2025. 45. Although the preferred option is to implement both the deposit taker and RBNZ portal the remainder of the RIS focuses on the deposit taker portal as that is the part requiring regulatory change. What are the marginal costs and benefits of the policy package? 46. The costs of the preferred policy package are incurred largely by deposit takers and the Reserve Bank. Costs incurred by deposit takers may be passed through to customers, but the extent of this is complex and depends on the extent to which DCS protection impacts the perceived risk of entities, their pricing decisions and the degree of competition within the sector. The costs borne by the Reserve Bank in connection with the DCS will also be recovered through the DCS levy and therefore ultimately borne by deposit takers or their customers. The costs to the sector are expected to primarily take the form of IT development costs to develop the webpage. The level of cost is therefore dependent on the complexity of the changes required and other entity specific factors. 47. The preferred policy option is necessary to support the credibility of the DCS. The preferred policy approach therefore carries two main types of benefits. Firstly, in the event of a failure, a DCS payment could be undertaken, which minimises the disruption associated with the failure of a deposit taker. Secondly, the existence of credible depositor protection is likely to reduce the risks of bank runs as depositors will have reduced incentives to withdraw funds if a deposit taker appears to be under stress (which increases the difficulties facing the institution). This second benefit therefore reduces the likelihood of failure events. 48. Assessment of the marginal costs and benefits is inherently difficult, as the DCS would only be activated in crisis situations. Deposit taker crises are rare and their scale is dependent on the specific entities involved. As a result, many of the costs and benefits of the policy proposals are subject to a significant level of uncertainty. 49. The following table considers the costs and benefits during the period leading up to and during the time that the transitional standard will apply, from 1 July 2025 until 30 June 2028 when it will be replaced by a permanent DCS standard which will be subject to

Ref #22471634 v1.0 IN CONFIDENCE separate policy decisions. Costs and benefits beyond 1 July 2028 will be considered in subsequent policy decisions. Affected groups (identify) Comment nature of cost or benefit (eg, ongoing, one-off), evidence and assumption (eg, compliance rates), risks. Impact $m present value where appropriate, for monetised impacts; high, medium or low for non￾monetised impacts. Evidence Certainty High, medium, or low, and explain reasoning in comment column. Additional costs of the preferred option compared to taking no action Deposit takers Upfront costs of pre￾positioning a DCS depositor page and system changes to support supplying information to RBNZ if required and requested. Costs to deposit takers will be lower than if the RBNZ portal was not also part of the preferred option as in that case greater emphasis would need to be placed on onboarding customers who do not currently have access. These costs may not be proportionate across all deposit takers due to the complexity of their systems and the resources they have available. One-off costs of operating a DCS depositor page and supplying information to RBNZ in the event of a failure. As systems will be pre-positioned the cost to implement if required is expected to be minimal. Low Low Medium High Reserve Bank One off admin costs of developing a standard Low High

Ref #22471634 v1.0 IN CONFIDENCE Section 3: Delivering an option How will the proposal be implemented? 50. The delivery of a DCS depositor page will be undertaken by deposit takers. Deposit takers will need to build the webpage and maintain the ability to activate it in the event of a failure. Where deposit takers are unable to comply with the proposed standard they will be required to come up with an alternate model that meets as many of the Reserve Bank’s requirements as possible given their specific circumstances. The Reserve Bank will be responsible for delivering a number of supporting requirements such as approving alternate models and providing the capacity to make payments following the and supporting existing deposit takers to comply Others Total monetised costs In consultation, deposit takers expressed no concerns with the costs of implementation, except for mobile apps, where the deadline is now extended Not available Medium Non-monetised costs Additional benefits of the preferred option compared to taking no action Deposit takers and depositors Financial stability benefits for all deposit takers and competitive benefits for smaller deposit takers from having a credible DCS mechanism. Medium Medium Reserve Bank and government Financial stability benefits of having a credible DCS mechanism. Medium Medium Others (eg, wider govt, consumers, etc.) Total monetised benefits Not available Non-monetised benefits Medium Medium

Ref #22471634 v1.0 IN CONFIDENCE receipt of data from deposit takers. The Reserve Bank will also develop the RBNZ portal option to provide an alternative in the event of a deposit taker failure. 51. Initially the requirements will be applied through a transitional standard before being incorporated into the core DCS standard when this is issued to apply from 1 July 2028. The core DCS standard is likely to include refinements and clarifications as the time for preparing it is greater and so there is more time available to refine the drafting. Policy decisions around the core DCS standard will be subject to a separate RIS when this is developed. How will the proposal be monitored, evaluated, and reviewed? 52. The new arrangements will be monitored by Reserve Bank and trustee supervision of deposit takers to ensure that they are meeting the requirements of the standard. This approach will be consistent with the approach for other requirements. 53. Because the webpage requirements need to be incorporated into the DCS core standard in order to apply after the transitional standard expires, there is an opportunity to review the effectiveness of the requirements once implemented and incorporate any lessons learned into the DCS core standard. This will also provide an opportunity to consider requirements that were not considered possible given the short implementation period, such as additional data collection requirements or testing. 54. The DCS core standard will be reviewed from time to time as part of good regulatory practice, in accordance with the Reserve Bank’s approach to prudential policy. Given the transitional standard is only intended to apply for three years, and has relatively limited requirements given its short implementation period, it is not anticipated that it will be reviewed between when it is issued and when it is revoked. 55. In the event of a DCS payment it is likely that there will be evaluations of the functioning of the payment processes.