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About the 2004 New Zealand FSAP

There have been significant changes to New Zealand’s regulatory landscape since our last FSAP in 2004. These changes were initiated (in part) in response to IMF recommendations from the 2004 FSAP review, as well as recommendation from the Capital Markets Development Taskforce and external developments such as the Global Financial Crisis (GFC).

The changes to New Zealand’s securities regulation include:

  • the Review of Financial Products and Providers (2006). This subsequently led to the RBNZ assuming responsibility for the regulation of the non-bank deposit taker (NBDT) and insurance sectors
  • the RFPP review also initiated the review of securities regulation. It resulted in a fundamental shift in the approach to securities regulation, with the establishment of the FMA and new standards for market conduct. This work led to the introduction of the Financial Markets Conduct Act 2013 (FMC Act).
  • the introduction of the AML/CFT Act (2009).

The FMA was established in 2011 in response to the Capital Market Development Taskforce recommendations to improve New Zealand’s financial system.   The concept was to consolidate a range of different financial regulatory functions into a single financial markets securities regulator.    

The FMA was also established to administer a new regulatory framework, which consolidated the regulation of securities into a single regime. This was a recommendation of the Capital Markets Development Taskforce and an implication of IMF recommendations in their 2004 FSAP review of New Zealand. 

Because of the increased urgency of improving confidence in financial markets as a result of the GFC, the FMA was in fact established prior to the completion of the new regulatory framework – the FMC Act.

The purpose of the FMC Act is to promote and facilitate the development of fair, efficient and transparent financial markets, and to promote the confident and informed participation of businesses, investors and consumers.

The FMC Act works to reform the regulation of financial conduct. It governs the way financial products are offered, promoted, issued and sold. This includes the on-going responsibilities of those who offer, issue, manage, supervise, deal in and trade financial products. The FMC Act also regulates the provision of certain financial services.

The changes introduced by the new legislation play a key role in building confidence in our markets, by providing better information for investors, as well as setting clearer rules for companies wanting to raise capital.

The transition to the FMC Act was the last major step of this reform, with the final phase of the transition taking place from 1 December 2014.

Although the new regime has been in effect since 1 December 2014, most regulated businesses and individuals have until 1 December 2016 to transition across from the old regime. 

The FMA is focused on helping the financial services sector through this transition in 2016. This work includes licensing and setting up new systems and processes for ongoing monitoring and oversight. 

The methodology the IMF use for their FSAP assessments has also been overhauled since the last New Zealand FSAP in 2004, so it is both necessary and useful to undertake a fresh assessment against the new international standards.

Other broader changes and those specific to the banking sector are covered off in the RBNZ’s 2016 New Zealand FSAP Bulletin. In short they include:

  • implementation of a prudential liquidity policy for the banking system (2010)
  • implementation of the new Basel III capital standards for the banking system
  • the development of a new bank resolution framework
  • the pivot towards a somewhat more intensive approach to banking supervision post-GFC
  • the development of a new macro-prudential policy framework (2013) and subsequent deployment of loan to value ratio (LVR) restrictions.