Statement of reasons

This notice, which comes into force on 1 March 2013 and is revoked on the close of 1 March 2014, exempts Mortgage Backed Bonds Limited (MBBL) from certain requirements of Part 5D of the Reserve Bank of New Zealand Act 1989 (the Act). MBBL is an entity that previously issued debt securities to members of the public, but is now in a moratorium approved by its depositors and has not yet repaid all of its depositors. MBBL is deemed to be a deposit taker under section 157C(3) of the Act.

MBBL is exempted from the following:

• the requirement in section 157I of the Act to have a credit rating:

• certain governance requirements in section 157L(1) and (3) of the Act:

• capital ratio requirements in sections 157T and 157U of the Act:

• related party exposures requirements in sections 157X and 157Y of the Act:

• liquidity requirements in sections 157ZA and 157ZB of the Act:

The exemptions are subject to conditions that include the following:

• that no debt securities are offered for subscription by, or on behalf of, MBBL. This restriction does not apply to offers of debt securities that could only be accepted by persons who come within the definition of eligible person in the Securities Act 1978 (which relates to wealthy persons and persons experienced in investing money or experienced in the industry or business to which the security relates) or by persons referred to in section 3(2)(a) of the Securities Act 1978 (to whom an offer of securities would not constitute an offer of securities to the public for the purposes of that Act):

• that MBBL ensures that any Internet site maintained by or on behalf of it displays a notice to the effect that it is exempted from sections 157I, 157L(1) and (3), 157T, 157U, 157X, 157Y, 157ZA, and 157ZB of the Act:

• that MBBL does not disclose an assessment of its creditworthiness that is in substance a credit rating:

• that MBBL does not increase or renew existing exposures to related parties or create any new exposures to related parties.

The Deposit Takers (Moratorium) Exemption Notice 2009 applied to several entities in moratorium, including MBBL. Many of the exemptions and conditions to those exemptions contained in this notice have been carried over from that class notice. That class notice is now being revoked by a sibling exemption notice being granted to the other entity to which that class notice applied, Propertyfinance Securities Limited.

The Reserve Bank, after taking into account the principles set out in section 157F of the Act, and satisfying itself as to the matters set out in section 157G(2) of the Act, considers it appropriate to grant the exemption because—

• the Bank is satisfied that the exemption is consistent with the maintenance of a sound and efficient financial system in that MBBL will be prevented from accepting deposits from the public:

• the additional direct and indirect costs of obtaining a credit rating, maintaining a minimum capital ratio, and complying with the liquidity, governance, and related party exposures requirements are unduly onerous and burdensome in the circumstances. MBBL is unable to accept deposits from the general public as a condition of this exemption, and existing depositors have agreed not to withdraw their deposits until they fall due under the new arrangement. In these circumstances, compliance with the requirements is not likely to provide material additional benefits to depositors:

• the exemption is conditional on MBBL not issuing any further debt securities to the public, but at the same time it does not preclude the possibility of investment, for example by a wealthy or experienced investor, that may assist MBBL in moratorium; therefore the exemption is not broader than reasonably necessary to address the matters that gave rise to the exemption.