Financial market infrastructure oversight
Oversight of payment systems
The Reserve Bank of New Zealand Act 1989 (‘the Reserve Bank Act’), Part 5B, provides for the oversight of payment systems. Under Part 5B, the Bank can require the supply of information or data relating to a payment system.
In March 2015, following consultation, the Reserve Bank published a policy statement on its oversight of FMIs to reflect the recently updated Principles for Financial Market Infrastructures issued by the Committee on Payments and Market Infrastructures (CPMI) and the Technical Committee of the International Organisation of Securities Commissions (IOSCO).
In March 2015, the Reserve Bank and the Financial Markets Authority (FMA), as the joint regulators of designated systems, also updated their policy statement on the designation and oversight of designated settlement systems.
Other payments-related policy
Under the multilateral netting provisions in section 310K of the Companies Act, the Reserve Bank is responsible for the recognition of clearing houses. The Reserve Bank has published a paper providing information and guidance on how to apply to become a recognised clearing house.
As provider of the Exchange Settlement Account System (ESAS), the Reserve Bank has also published a policy on access to Exchange Settlement Accounts.
Designation and oversight of settlement systems
The Reserve Bank Act, Part 5C, provides for the designation of settlement systems. Designation gives statutory backing for finality of settlement and netting through a designated settlement system. There are currently four designated settlement systems.
Part 5C makes the Reserve Bank and the FMA joint regulators of designated settlement systems. The joint regulators’ roles and policies are explained in the policy document, Designation and Oversight of Designated Settlement Systems. The joint regulators have also entered a memorandum of understanding (MoU) in relation to Part 5C of the Act, setting out a transparent and readily available record of how they will work together.
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 are set out in the application guidelines.
Relationships with other regulators
Financial Markets Authority
The Reserve Bank and the FMA have entered a memorandum of understanding (MoU) in relation to Part 5C of the Act (see ‘Designation and oversight of designated settlement systems’ above).
Reserve Bank of Australia
The Reserve Bank and the Reserve Bank of Australia (RBA) have entered a memorandum of understanding (MoU) setting out how they will co-operate on the oversight of cross-border clearing organisations.
Bank of England
The Reserve Bank and the Bank of England (BoE) have entered a Memorandum of Understanding (MoU) in respect of the oversight of Central Counterparties (CCPs).
European Securities and Markets Authority
The Reserve Bank and the European Securities and Market Authority (ESMA) have entered a Memorandum of Understanding (MoU) in respect of the oversight of Central Counterparties (CCPs).
The Reserve Bank, as part of its involvement in the Executives’ Meeting of East Asia-Pacific Central Banks (EMEAP), participates in the EMEAP Working Group on Payment and Settlement Systems.
CLS Oversight Committee
The Reserve Bank is a member of the international 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.
The Committee on Payments and Market Infrastructures (CPMI) is 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 CPMI is a global standard setter in this area. It has 25 central bank members and relationships with many other central banks to strengthen payment systems globally. This includes the Reserve Bank of New Zealand. The CPMI’s Secretariat is hosted by the Bank for International Settlements (BIS).
For information on current issues and recent developments in the New Zealand payment system read the Financial Stability Report