The Reserve Bank will soon get stronger powers to deal with the finance companies under new legislation. The legislation, Non-Bank Deposit Takers Bill, will be presented in the parliament next week by the Finance Minister, Bill English. The new law is expected to be enforced in June 2013.

The new stronger rules will be for related-party lending, increased capital requirements, and credit ratings.

Under the new law, there will be a regulatory system for companies that offer debt securities to the public. After the enforcement of the law, the banks will have better access to investigate a firm for information.

Under the legislation, the banks, which fail to comply with the regulations, will have to pay penalties up to a maximum of $2 million for an entity up to $200,000 for individuals or 18 months imprisonment.

This is the second bill of its kind to be introduced by the legislation. The previous bill introduced minimum capital ratios and credit ratings for NBDTs.

Mr. 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”.