The Government is introducing legislation to further tighten the rules for finance companies, completing a new regulatory regime for non-bank deposit takers (NBDTs).
The Non-Bank Deposit Takers Bill, which would implement licensing requirements and strengthen the Reserve Bank's powers, will be introduced to Parliament next week.
The bill will require directors of finance companies to notify the Reserve Bank if a director or senior officer triggers new prescribed suitability criteria. The Reserve Bank would then have the power to remove those individuals.
It is expected to become fully effective on June 1, 2013, after a one-year transition period to enable existing NBDTs to meet the new licensing rules.
"This is part of a suite of measures designed to lift investor confidence in our finance sector and capital markets - we've established the Financial Markets Authority, put in place a new regime for financial advisers, required licensing of trustees and auditors and strengthened disclosure requirements," says finance minister Bill English.
He says deposits of about $8 billion have been put at risk since 2006 by finance industry failures.
According to English, the Government also has further plans to "invigorate" markets and lift investor confidence by extending a mixed ownership model to some state-owned enterprises.