Non-bank Deposit Takers (Credit Union Baywide) Exemption Notice (No 2) 2020

RESERVE
BANI(
OF NEW ZEALAND
TE POTEA MATUA
Non-bank Deposit Takers (Credit Union
Baywide) Exemption Notice (No 2) 2020
Under section 70 of the Non-bank Deposit Takers Act 2013, the Reserve Bank of New Zealand gives the following notice (to which is appended a statement of reasons of the Bank). Notice 1 Title This notice is the Non-bank Deposit Takers (Credit Union Baywide) Exemption Notice (No 2) 2020. 2 Commencement This notice comes into force on 22 September 2020. 3 Revocation This notice is revoked at the close of 21 May 2021. 4 Application The exemptions in clause 6 cease to apply if Co-op Money NZ becomes a guaranteeing subsidiary of CUB. 5 Interpretation ( 1) In this notice, - Act means the Non-bank Deposit Takers Act 2013 . Co-op Money NZ means the New Zealand Association of Credit Unions, CU Group Trust, C U Securities Limited as trustee of the CU Group Trust, CUI Insurance Limited and FACTS Limited. CUB means Credit Union Baywide. maximum limit means the maximum limit on aggregate exposures to related paities that a deposit-taker must not exceed (which, under regulation 23 , must be included in the trust deed). (2) In this notice, a reference to a regulation means a regulation of the Deposit Takers ( Credit Ratings, Capital Ratios, and Related Paity Exposures) Regulations 2010.

6 Exemptions from requirements to include exposures to Co-op Money NZ in aggregate related party exposures CUB is exempt from compliance with the following regulations:
(a) regulation 23(3)(a), to the extent that paragraph (b) exempts CUB from the requirement to calculate the maximum limit in accordance with regulation 24:
(b) regulations 24(1)(a)(i) and 25, to the extent that those regulations require CUB, in calculating the maximum limit (and in measuring whether or not CUB is exceeding the maximum limit), to identify all actual, potential, or contingent exposures to loss for CUB under a contract or anangement if Co-op Money NZ fails to discharge its obligations. 7 Condition of exemptions in clause 6 The exemptions in clause 6 are subject to the condition that the aggregate exposures of CUB to related parties (including Co-Op Money NZ, calculated as if the exemptions in clause 6 were not in effect), does not exceed 25% of CUB's capital. Dated at Wellington this 16th day of September 2020. Geoff Bascand Deputy Governor

Statement of reasons
This note is not part of the notice, but is intended to indicate its general effect. This notices comes into force on 22 September 2020, and is revoked at the close of 21 May 2021. The notice replaces the Non-bank Deposit Takers (Credit Union Baywide) Exemption Notice 2020, which is revoked at the close of2 l September 2020 (Existing Notice). This new notice replicates the Existing Notice. The notice exempts CUB from the related party exposure requirements under the Deposit Takers (Credit Ratings, Capital Ratios, and Related Party Exposures) Regulations 20 10 (the Regulations). The Regulations require CUB to include in its trust deed a maximum limit on aggregate related party exposures, which must not exceed 15% ofCUB's capital. The effect of the exemptions is that CUB's maximum limit on aggregate related party exposure, including the exposure to New Zealand Association of Credit Unions (which trades under the name Co-op Money NZ) and certain associated entities, does not exceed 25% of its capital. The Reserve Bank of New Zealand, after taking into account the principles in section 8 of the Non-bank Deposit Takers Act 2013 and satisfying itself as to the matters set out in section 70(2) of that Act, considers it appropriate to grant the exemptions as the reasons in the Existing Notice remain valid and relevant. In addition, more time is needed than was anticipated at the time the Existing Notice was granted for CUB and Co-op Money NZ to restructure their affairs in such a way that the exemptions will no longer be necessary. Specifically, -

• The exemptions are consistent with the maintenance of a sound and efficient financial system because
  they would prevent disruption in the credit union sector and enable CUB and the other member credit unions of Co-op Money NZ to continue to offer existing products and services to their customers:
• CUB is providing financial support to enable Co-op Money NZ to continue trading whilst
  arrangements for CUB to acquire Co-op Money NZ are completed. CUB would be unable to provide financial suppmt to Co-op Money NZ if it was required to comply with the related party exposure limits set out in the regulations. In the circumstances, it would be unduly onerous and burdensome to require CUB to comply with the Regulations relating to the maximum limit:
• This notice only exempts CUB from the regulations relating to the maximum limit on aggregate related
  party exposmes to the extent that the maximum limit of aggregate related paity exposure does not exceed 25% of capital. The limit on aggregate exposures of CUB to related parties of 25% provides flexibility for CUB and Co-op Money NZ to restructure their affairs in the most optimal manner. In addition, the notice is revoked at the close of21 May 2021 , by which time the exemptions are expected to no longer be necessary. Therefore, the notice is not broader than is reasonably necessary to address the matters which give rise to the exemptions.