How we exempt non-bank deposit takers

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How we oversee non-bank deposit takers

Under Section 70 of the Non-bank Deposit Takers Act 2013 (the NBDT Act) we have the power to exempt any licensed non-bank deposit taker (NBDT) class of licensed NBDT or trustee from any provision of the NBDT Act, except the requirement to be licensed.

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When we can grant exemptions

Exemptions allow flexibility in applying the NBDT regulatory regime to specific NBDTs or classes of NBDTs, provided certain conditions are met.

We can only grant an exemption when we are satisfied that:

the exemption will be consistent with the maintenance of a sound and efficient financial system

compliance with the relevant provision(s) would, in the circumstances, require the licensed NBDTs or class of licensed NBDTs to comply with requirements that are unduly onerous or burdensome

the extent of the exemption is not broader than what is reasonably necessary to address the matters that gave rise to it.

The presumption is that all entities that clearly fall within the definition of an NBDT will be subject to prudential requirements, and that exemptions—especially class exemptions—should be the exception, not the rule.

Terms and conditions of exemptions

The NBDT Act permits us to place terms and conditions on an exemption as we see fit. This allows for alternative prudential requirements and mechanisms, and ensures the substance of the original obligation is maintained.

Therefore, in cases where an exemption from certain obligations is appropriate (for example, an exemption from capital, related party or liquidity requirements), the exemption is likely to be granted with alternative terms and conditions imposed. What this means is that all NBDTs could expect to meet some form of minimum capital, related party or liquidity standard, but the detailed requirements and exact form may differ according to the individual circumstances of each NBDT.

Principles we must consider

the desirability of consistency in the treatment of similar institutions, regardless of matters such as their corporate form

the importance of recognising that:

it is not the purpose of the NBDT Act to eliminate all risk in relation to the performance of NBDTs or to limit diversity among NBDTs

depositors are responsible for assessing risk in relation to potential investments and for their own investment choices

the desirability of providing depositors with enough information to enable them to assess risk in relation to potential investments and to distinguish between high-risk and low-risk NBDTs

the desirability of sound governance of NBDTs

the desirability of effective risk management by NBDTs

the need to avoid unnecessary compliance costs

the need to maintain competition within the NBDT sector.