Who can designate FMI
The Minister may designate an FMI on the recommendation made by the regulator. The regulator may recommend designation:
- on our own initiative if we believes the FMI is systemically important in New Zealand
- in response to an application from the operator of the FMI.
FMI can apply to us or us and the FMA to be designated, even if the FMI is not considered systemically important.
FMI may want to have the benefits of designation, including finality of settlements. FMI designated in this way will be subject to the same set of regulatory requirements as FMI whose designation notice specifies they are systemically important, with the exception of crisis management powers under Part 4 of the Act, which only apply to FMI whose designation notice specifies they are systemically important.
How regulators decide if an FMI is systemically important
The Systemic Importance Framework explains how the regulator decides whether an FMI is systemically important in New Zealand. It draws from the matters the regulator must consider in the FMI Act as well as international best practice and is judgement based.
The specific measures the regulator will use to help assess the systemic importance of FMI are:
- size of an FMI
- the type of participants in an FMI
- what the FMI does and how wide-ranging its services are
- how connected the FMI and its participants are with each other and other financial institutions
- where the financial risk is concentrated
- how easily the FMI could be replaced by an alternative