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Cross-sector collaboration

Financial Sector Assessment Programme

Findings and recommendations of the International Monetary Fund's 2016 review of New Zealand's financial system. The review is known as a Financial Sector Assessment Programme (FSAP). 

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About the FSAP review

The International Monetary Fund (IMF) undertook a FSAP for New Zealand in 2016.

FSAP is a comprehensive review of a country’s financial system, with a particular focus on the quality of financial sector regulation. The previous New Zealand FSAP was conducted in 2003 and 2004.

The 2016 New Zealand FSAP included a review of our set of financial sector responsibilities, as well as an assessment of changes in New Zealand’s approach to securities and market conduct regulation.

Read more about the International Monetary Fund

What the review found

The IMF released its main report, the Financial System Stability Assessment (FSSA), in April 2017.

IMF Report: New Zealand Financial System Stability Assessment
PDF | 2MB

In May 2017, the IMF released a series of other reports and technical notes covering its findings and recommendations in more detail.

Detailed assessment of observance: Basel core principles for effective banking supervision
PDF | 1MB
Detailed assessment of observance: Insurance core principles
PDF | 1MB
Technical note: Stress testing banking sector 2017
PDF | 2MB
Technical note: Macroprudential institutional framework 2017
PDF | 622KB
Technical note: Regulation and oversight of Financial Market Infrastructures
PDF | 1MB
Technical note: Contingency planning and crisis management framework
PDF | 869KB
Technical note: Fund management – Regulation, supervision and systemic risk monitoring
PDF | 538KB

In its FSSA, the IMF declared New Zealand’s banking system to be resilient but recommended ways to improve the strength of the country’s financial sector and the regulatory framework.

The New Zealand banking system was well-placed to manage risks and vulnerabilities associated with current developments in the housing sector, the high level of household debt and low dairy prices. The FSAP included a range of ‘stress tests’ of the large New Zealand banks.

The report said New Zealand has a good institutional framework for macroprudential policy and that loan to value (LVR) restrictions had generated financial stability benefits, although it could be strengthened further. It also recognised a number of important positive features about our supervisory framework, including the strong trans-Tasman relationships.

Recommendations for improvements included increasing the intensity of supervision for both the banking and insurance sectors, within our ‘three-pillar’ approach to prudential regulation that is based on self, market and regulatory discipline.

The IMF endorsed our current (2016) legislative proposal to improve the regulation and oversight of financial market infrastructures, as well as the importance of reviewing the bank capital framework.

Our response to the IMF review

We have been considering the FSAP findings and recommendations in our areas of responsibility and how these might further our statutory purpose of promoting a sound and efficient financial system.

Many of the FSAP recommendations underpin our policy development, including the development of improved legislation for regulating and supervising banks, non-bank deposit takers, financial market infrastructures and insurers.

More information

Bulletin Article - July 2017: Outcomes of the 2016 New Zealand Financial Sector Assessment Programme (July 2017)

Bulletin Article - April 2016: The 2016 New Zealand Financial Sector Assessment Programme (FSAP)

Bulletin Article - June 2004: Outcomes of the Financial Sector Assessment Programme for New Zealand (June 2004)