Payment system oversight

The Reserve Bank oversees the New Zealand payment system for the purpose of promoting the maintenance of a sound and efficient financial system. The Reserve Bank’s payment system oversight role is explained in Statement of principles: payment system oversight, also available as a PDF file (34KB).

Features

In Payment system governance we build on our Statement of principles: payment system oversight, setting out and explaining our views on payment system governance.

New Zealand Payment System, a speech given by the Governor on 11 August 2005.

Payment and settlement systems in New Zealand updated July 2012 (PDF 654KB).
This paper provides an overview of the payment and settlement systems in New Zealand and the Reserve Bank's payment system roles.

The Financial Stability Report contains general information on current issues and recent developments in the New Zealand payment system. Before 2005 these matters were reported on in the Reserve Bank Bulletin.

Consultation on strengthening the Reserve Bank’s statutory payment oversight powers

In March 2013 the Reserve Bank issued a consultation paper (PDF 414KB) setting out its proposals on strengthening its statutory payment oversight powers. This followed a recent review by the Reserve Bank which concluded that its existing payment oversight powers were insufficient and needed to be strengthened.

The paper proposes establishing a new legislative framework for the oversight of systemically important payment and settlement systems, which includes:

Formally recognising systems that are systemically important;
Giving the Reserve Bank formal powers to oversee the recognised systems, such as powers to impose conditions and direct;
Setting up a tailored statutory management regime for recognised systems.

The consultation paper also proposes that the new recognition regime runs parallel to the existing designation regime under Part 5C of the Reserve Bank Act 1989, under a similar co-regulatory arrangement with the Financial Markets Authority.

The Reserve Bank invites interested parties to make submission on all the elements of the consultation paper by 3 May 2013.

The designation and oversight of designated settlement systems

Part 5C of the Reserve Bank of New Zealand Act 1989 (the Act) provides for the designation of settlement systems. Designation gives statutory backing for finality of settlement and netting through a designated settlement system. Part 5C also makes the Financial Markets Authority (previously the Securities Commission) a joint regulator of designated settlement systems with the Reserve Bank. The Financial Markets Authority was established on 1 May 2011. It took over the functions of the now disestablished Securities Commission, including those relating to designated settlement systems.

The policy document “The Designation and Oversight of Designated Settlement Systems” (DSS1) (PDF 128KB) explains the roles and policies of the Reserve Bank and the Financial Markets Authority.

The Financial Markets Authority and the Reserve Bank have entered into a Memorandum of Understanding (PDF 2.25MB) in relation to Part 5C of the Reserve Bank of New Zealand Act 1989, setting out a transparent and readily available record of how they will work together as joint regulators of designated settlement systems.

Designation under Part 5C of the Act is an opt-in regime, with settlement systems needing to apply for designation. The application process and information that should be submitted with an application for designation are set out in this document: Application Guidelines for Designation under Part 5C of the Reserve Bank of New Zealand Act 1989 (DSS2) (PDF 53KB).

There are currently four designated settlement systems.

Read the ‘questions and answers’ sheet on designated settlement systems.

Other payments-related policy

The Reserve Bank is also responsible for the recognition of clearing houses to give effect to the multilateral netting provisions in the Companies Act. For information and guidance on applications to become a recognised clearing house under section 310K of the Companies Act, see Application for status as a recognised clearing house, October 2000 (PDF 19KB).

As provider of the Exchange Settlement Account System, the Reserve Bank also has a Policy on Access to Exchange Settlement Accounts (3 March 1999).

Relationships with related regulators

The Financial Markets Authority and the Reserve Bank have also entered into a Memorandum of Understanding in relation to Part 5C of the Reserve Bank of New Zealand Act 1989 (see “The designation and oversight of designated settlement systems” above).

Internationally, the Reserve Bank is a member of the CLS Oversight Committee. Oversight of the CLS System is conducted co-operatively by the relevant central banks in accordance with the Protocol for the Co-operative Oversight Arrangement of CLS.

As part of its involvement in EMEAP (the Executives' Meeting of East Asia-Pacific Central Banks), the Reserve Bank also participates in the EMEAP Working Group on Payment and Settlement Systems (see the EMEAP website for more information on EMEAP).

The Committee on Payment and Settlement Systems (CPSS) serves as a forum for central banks to monitor and analyse developments in domestic payment, settlement and clearing systems as well as in cross-border and multicurrency settlement schemes. The Committee also focuses on standard-setting activities. The CPSS comprises representatives from 25 central banks and has developed relationships with many non-CPSS central banks in order to help strengthen payment systems globally. The CPSS has a comprehensive range of publications on matters relating to payment systems and payment system oversight. Its Secretariat is hosted by the Bank for International Settlements (BIS) – see the BIS website for more information on the CPSS and for access to its publications.

Links

For information on the Reserve Bank's payment and settlement systems see the Payment & Settlement System section of our website.

See also the Payment and settlement system frequently asked questions (FAQ) section of our website for links to relevant Bulletin articles and international resources.