Why New Zealand needed new FMI legislation
New legislation was needed because the previous regime (as contained in Parts 5B and 5C of the Banking (Prudential Supervision) Act 1989) was considered insufficient to guard against market failures. These are failures that may have resulted in the operator of an FMI not putting enough focus on risk management or making inadequate investment into underlying infrastructure, with potential financial stability implications.
The new regulatory framework is consistent with international best practice.
Overview of regulatory development
The new legislative framework arose out of a detailed review of FMI regulation we began in 2013. This culminated in the passing of the Act in May 2021 and FMI standards that came into force on 1 March 2024.