BANKING IN NEW ZEALAND

 Govt Deposit Guarantee Paper

Many countries in the world are presently beset with problems in their banking systems caused by the American lead in an unprecedented credit “giveaway” in recent years. The extremely loose attitude to the granting of credit to those who are not worthy of such a facility was brought about by excess cash in the banking system. Reserve Banks, or Central Banks, failed to recognize the dangerous situation and did not act to prevent a disaster. The day had to arrive when the situation forced unpleasant consequences upon us and it has now done so in those countries that allowed the excesses to take place, or became exposed to it in other ways.

Prudent people everywhere are looking for a safe haven in which to keep their cash. Unfortunately, most people are only aware of events in their own country and events in countries that grab the headlines for a variety of reasons. You need more than this to find the safe haven.

What will be the hallmarks of a safe haven? We suggest the following:-

A.         Medium sized countries with a well developed economy.

B.         Sophisticated laws that do not impinge unduly on the rights of citizens.

C.         A low level of “red tape” for both people and business.

D.         Tax laws that encourage rather than deter foreigners.

E.         Well regulated banking where the Reserve Bank applies sensible, rather than reckless, requirements governing reserve asset ratios for licensed banks and unwaveringly applies those standards.

F.         Absence of exchange control requirements or restrictions.

G.         An economy that is not heavily reliant upon commodities.

H.         Financial institutions that have very little exposure to the excesses of the USA and other affected countries.

New Zealand must certainly be at the top (or very close to the top) of the safe haven candidate list. It satisfies all of the above points. It is also a fact that no licensed bank in New Zealand has ever gone bankrupt. Adding to the evidence is the fact that the New Zealand Reserve Bank has refused to follow the lead of the USA and other major countries in cutting interest rates as a part solution of the crisis. The reason – there is no crisis in New Zealand. New Zealand is not exposed to the crisis in any direct way.

We will not attempt to guide you in the direction of any particular New Zealand Financial Institution but you will need to find a bank that offers multi currency accounts and which will accept your funds in a fiduciary capacity rather than as a routine deposit taker. This little known facility does provide you with an extra layer of protection for your money.

Geoffrey Taylor,

B.Com, MBA, Ph.D.