The Reserve Bank has published an exposure draft of the Financial Market Infrastructures Bill (FMI Bill), and is asking for feedback from stakeholders.
The FMI Bill covers vitally important financial systems for New Zealanders, including the infrastructure that supports our day-to-day transactions. The Reserve Bank has previously consulted on the changes required, and have now put a draft bill out for consultation.
The full text of the Bill can be found here. With further information available here.
If you would like to contribute to our submission, please email for further information.
The key changes contained in the draft Bill are:
The Bill establishes a standalone Act that will replace the current regime, which is contained in Parts 5B and 5C of the Reserve Bank of New Zealand Act 1989.
The purposes of the new regulatory regime will be to:
- promote the maintenance of a sound and efficient financial system;
- avoid significant damage to the financial system that could result from problems with an FMI, an operator of an FMI, or a participant of an FMI;
- promote the confident and informed participation of businesses, investors, and consumers in the financial markets; and
- promote and facilitate the development of fair, efficient, and transparent financial markets.
The regime will cover all types of FMI, including payment systems, settlement systems, central counterparties, central securities depositories, and trade repositories. The Reserve Bank and Financial Markets Authority (FMA) will be the joint regulators of FMIs (except payment systems, where the Reserve Bank would be the sole regulator).
Under the regime the regulators will have information gathering and investigative powers in respect of all FMIs, to enable monitoring of the wider sector. However, the focus of the Bill is on designated FMIs. These are FMIs that are either:
- Identified as systemically important by the regulators and brought into the designation regime;
- Apply to be designated in order to access legal protections around settlement finality, netting and the enforceability of their rules.
Designated FMIs will be subject to enhanced regulation by the joint regulators. In particular, designated FMIs will be subject to:
- Legally binding standards issued by the regulators;
- A requirement to have contingency plans for dealing with financial or operational failure;
- Enhanced oversight of their rules by the regulators; and
- Crisis management powers (i.e. direction powers and a tailored statutory management regime).
The regime also provides for a graduated range of investigative and enforcement tools (these include some new tools that are not currently provided for under existing prudential regimes for banks and insurers, such as the power to enter into enforceable undertakings).
Further detail can be found here.
If you would like to contribute to our submission, please email for further information.
