See a summary of our work on regulatory changes to facilitate compliance for foreign margin requirements for over-the-counter derivatives.
The Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Act 2019 (the FMRA Act) has been passed by Parliament.
Part 1 of the Act contains amendments to other legislation to enable relevant New Zealand entities to comply with foreign margin rules for uncleared OTC derivatives. These amendments came into force on 31 August 2019.
In 2018, Cabinet agreed to a number of legislative amendments to address aspects of New Zealand law that impede compliance with foreign margin requirements for OTC derivatives. These include amendments to the:
The amendments will mean that derivatives counterparties will be able to enforce their security interest over margin without delay, and ahead of other creditors, in the event of default by the other party to the derivative contract. More specifically, they will:
The amendments will apply only in relation to derivatives contracts that meet certain requirements, and only where those contracts were entered into by prescribed entities (specifically, registered banks, Accident Compensation Corporation, the New Zealand Superannuation Fund, and central counterparties that are designated settlement systems under Part 5C of the Reserve Bank of New Zealand Act 1989).
These constraints on the amendments are designed to:
We published the individual responses we received as part of the consultation in October 2017, where consent to do so was provided by respondents.
Jointly with the Ministry of Business, Innovation and Employment (MBIE), we sought feedback from the public and stakeholders on the implications for New Zealand of foreign margin requirements for uncleared over-the-counter (OTC) derivatives.
The consultation paper outlined our joint views on issues and proposed options to ensure financial institutions continued to have access to international capital markets.