The imminent arrival of a deposit guarantee scheme in New Zealand (scheduled to roll out in mid 2025) has triggered a new Non Bank Deposit Taker (NBDT).
Although it hasn't operationally launched yet, Welcome Limited has secured registration as a NBDT by the Reserve Bank of New Zealand.
They say they are the first NBDT to be registered in at least ten years. Non-bank financial institutions are a sector that has been shrinking since the aftermath of the GFC, and the rout of finance companies from 2008 to 2014.
As a registered NBDT they will be eligible for the Depositor Compensation Scheme coverage when it is instituted. That will guarantee depositors at each institution for up to $100,000 of deposit account protection.
Welcome has been in development since late 2023, and applied to the RBNZ for NBDT registration in April 2024. It is a project led by Anton Douglas, the ex-CEO of Midlands Mortgage Trust and is based out of Hastings. Douglas has a 20% stake, and the company has a cornerstone 64% shareholding by the family investment office of Hawke's Bay's TUMU Group.
They say they are responding to "the growing demand from investors for higher returns, without sacrificing security and transparency. Welcome will offer higher deposit rates than banks, with more certainty of returns and better protection than mortgage funds and unregulated 'wholesale' alternatives."
Operational launch for both lending and investing is expected to be early April. They say they chose the capital-intensive NBDT regulated structure because it can scale sustainably.
Welcome will offer first mortgage loans to residential and commercial borrowers, "tailored to their needs". These will be the needs of borrowers who don’t fit into "rigid bank protocols or don’t get an answer quickly enough to move on an opportunity.” Essentially that means lending via mortgage brokers for clients outside the CCCFA realm.
Welcome Limited is not a registered bank. No money is currently being sought, and financial products cannot currently be applied for or acquired. The offer of secured term deposits, if made, will be made in accordance with the Financial Markets Conduct Act 2013.
(They will be offering residential home loans. But these will have nothing to do with the old Kāinga Ora/HNZ Welcome Home Loan program that was managed through some existing bank lenders. That official program has now been re-branded as the First Home Loan program, but its rather long history may make for some initial name confusion, even if the target borrowers will be quite different.)
When they launch, we will include their mortgage and deposit offerings in our comprehensive rate tables.
11 Comments
Once the deposit guarantee scheme kicks in won’t many people move their savings term to any non-bank financial institutions with higher deposit rates than banks. Currently several non-banks are offering 6.5% on a one-year TD compared to banks whose offerings are mostly at or 4.75%. Given that up to $100,000 per institution is guaranteed under the scheme, the incentive to move seem quite strong. This would appear to encourage new entrants and incentivise mush greater risk-taking among the non-banks. Am I missing something?
They are offering 6.5% 1 year TDs now because the guarantee doesn't start until mid year. Will be very interesting to see what they are offering when they are guaranteed. If one of these B grade finance companies does fail, I wonder how long you would have to wait to get your funds?
I'm still waiting to hear what will be done with the revenue from the deposit guarantee scheme (before its needed for payouts).
Will the government of the day simply treat it as revenue, and spend it?
Will they invest it in low risk financial products, thus letting it incur some risk, and erode against inflation?
Will they invest it in higher risk assets that will likely perform well, except for the crisis times when they're needed?
Crazy that this isn't already known.
In some ways I preferred the OBR. It affected all depositors whether large non non bank financial institutions eg investment funds and Kiwisaver or retail depositors. Everyone took the same % haircut. Now we have retail depositors protected but what of the large financial institutions where individuals money is bulked up into one large bank account. All these large financial institutions have their funds in one bank. I suspect once the $100k is paid out and those funds run out the large financial institutions with cash/TD deposits will be hit far harder, even to the extent that all their cash is "robbed" by the RBNZ in sorting out the failed bank.
Under the OBR scheme a commentator once said that with a fund manager your funds were held in a trust account and thus were immune to an OBR. Not so. The trust account is more for financial fraud by the institution. For an OBR, RBNZ is only interested in the funds held in the bank, not the mechanism by which they are held.
Anyone more knowledgeable on this mater I'd certainly like to know. The above is my understanding, not derived from an actual knowledge of the regs.
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