Non-bank deposit takers to gain access to RBNZ settlement accounts via 'expedited application process'

The Reserve Bank (RBNZ) says it will open its settlement accounts to non-bank deposit takers such as building societies, as well as others, potentially including payment service providers, overseas deposit takers and financial market infrastructure operators.

Broadening access to the Exchange Settlement Account System (ESAS) follows an RBNZ review, and complaints from non-bank deposit takers (NBDTs) that access to settlement accounts gives banks a major competitive advantage. Broader settlement account access was also raised in the Commerce Commission's market study on personal banking services, with the Commission recommending widening access.

The ESAS is New Zealand’s wholesale real-time gross settlement system for payments used for processing and settling payments between banks and other financial institutions. It's owned and operated by the RBNZ. Settlement cash in ESAS is remunerated at the Official Cash Rate.

Those with ESAS accounts currently include ANZ, ASB, ASX, BNZ, Bank of China, China Construction Bank, Citibank, HSBC, ICBC, Kiwibank, NZX, the RBNZ, TSB, CLS (Continuous Linked Settlement), the Local Government Funding Agency, Treasury's Debt Management Office, the NZ Super Fund, Rabobank and Westpac.

Other entities including NBDTs, payment service providers and fintechs, have expressed an interest in obtaining ESAS accounts.

In a statement on Monday the RBNZ said at a meeting last Thursday its board approved revised access criteria for the ESAS, the payments and settlement system used by banks and other approved financial organisations. New access criteria was developed through a multi-year review of ESAS access including two public consultations, it says.

The new criteria will open ESAS eligibility to more non-bank entities in two phases, the RBNZ says. Firstly, to licensed NBDTs such as building societies, credit unions and deposit taking finance companies, and secondly to other entities that meet the access criteria. This may include payment service providers, overseas deposit takers and operators of designated Financial Market Infrastructures (FMIs).

FMIs are systems or arrangements that provide trading, clearing, settlement and reporting services in relation to payments, securities, derivatives and other financial transactions. 

"The revised policy and criteria allow ESAS access and use to be broadened while protecting the safety, efficiency and integrity of this vital system,” RBNZ Payment Services Director Steve Gordon says.

Gordon notes licensed NBDTs have requested access to the ESAS to hold reserves to meet prudential liquidity requirements.

"While every application will be carefully and individually assessed, the way licensed NBDTs in New Zealand intend to use the ESAS, and their regulation by RBNZ, mean their application process will be less complex than other non-bank entities and can be expedited," Gordon says.

"We are working to finalise details and information for potential applicants so we can open the application process as quickly as possible."

"As soon as practicable in the coming weeks, we will publish submissions from the second ESAS access review consultation, the revised access policy and criteria, and information for phase one applicants to begin the application process," adds Gordon.

"We will provide another update, and revise ESAS content on our website, when more information is available."