Our oversight of financial market infrastructures
We oversee financial market infrastructures (FMIs) in New Zealand, such as payment and settlement systems, to promote the maintenance of a sound and efficient financial system.
In May 2021, the Financial Market Infrastructures Act (the FMI Act) was passed into law. The FMI Act establishes an enhanced regulatory framework for FMIs.
Under the FMI Act, the Reserve Bank and the Financial Markets Authority (FMA) will be joint regulators of most FMIs, including central securities depositories, securities settlement systems, central counterparties and trade repositories. We will be the sole regulator of pure payment systems under the FMI Act.
See Schedule 3 of the Memorandum of Understanding between us and the Financial Markets Authority formalising the relationship of cooperation.
The FMI Act provides the regulators with comprehensive regulatory, supervisory, enforcement and crisis management powers in respect of important FMIs.
There will be a transition period of about 18 months to the new regulatory framework. Public consultation will also occur during this period on important implementation matters, such as the design of standards to be made under the FMI Act.
The FMI Act will replace the current regime, which is contained in Parts 5B and 5C of the Reserve Bank of New Zealand Act 1989.
Our oversight of FMIs
Our overall objective when administering the FMI Act is to encourage the efficiency and soundness of the financial system and reduce the damage that could arise from a failure of an FMI or other financial system distress.
We also aim to minimise the risk (or the perception) that either we or the government may be expected to bail out any financial institution that encounters difficulties.
Our aim is to promote the development of FMIs that:
- are efficient, open and flexible
- have a high level of integrity
- are robust in the face of financial crises.
Policies and approach
While we transition to the FMI Act, the Banking (Prudential Supervision) Act 1989 continues to specify our oversight powers for FMIs.
Additional policies, standards and conditions are specified in a policy document we issued in March 2015: Oversight of Financial Market Infrastructures in New Zealand. This policy document broadly adopts the CPMI-IOSCO Principles for Financial Market Infrastructures as a basis for FMI oversight.
Designation of FMIs
Designation gives statutory backing for finality of settlement and netting through a designated financial market infrastructure.
Before the Financial Market Infrastructures Act (the FMI Act) passed in May 2021, Part 5C of the Banking (Prudential Supervision) Act 1989 provided for the designation of settlement systems. Under Part 5C, it was not compulsory for FMIs operating in New Zealand to be designated. However, under the FMI Act, an FMI will be designated if it is determined by the regulators to be systemically important.
An FMI that is not systematically important can continue to opt in to the regime.
There are currently five designated settlement systems in New Zealand.
View the register of designated settlement systems in New Zealand
Relationships with other regulators
We are a member of a range of councils, groups, organisations and committees in New Zealand and overseas.
These memberships reflect shared interests and the benefits of cooperation for promoting effective and efficient financial sector regulation and supervision.
These memberships include the Executives' Meeting of East Asia-Pacific Central Banks (EMEAP) and the CLS Oversight Committee.
For information on current issues and recent developments relating to the New Zealand's financial market infrastructure, see the Financial Stability Report.