The New Zealand government plans to introduce new legislation that will allow the central bank to remove company directors if they are not suitable, Minister of Finance Bill English said Monday.
More than 27 investment funds and second-tier finance companies -- which engage in lending, mostly to property developers -- have collapsed in New Zealand since May 2006, affecting investor funds worth about NZ$2.8 billion.
Many ran into difficulty when the local property market suffered declines in both value and demand amid tightening credit conditions but several others were allegedly mismanaged and several directors are currently facing charges.
“From 2006, deposits of about NZ$8.6 billion were put at risk by finance industry failures,” English said. “Last year we implemented the first stage of prudential regulation for non-bank deposit takers - bringing in rules around credit ratings, risk management, governance, capital, related party exposures and liquidity. This bill completes that regulation.”
The new bill is expected to be introduced to parliament next week and be effective from June 1, 2013.