New legislation enacted
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.
June 2018: legislative amendments
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:
- Reserve Bank of New Zealand Act 1989 (now the Banking (Prudential Supervision) Act 1989)
- Corporations (Investigations and Management) Act 1989
- Companies Act 1993
- Personal Property Securities Act 1999.
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:
- carve out the claims of these derivatives counterparties from general moratoria on creditors’ claims that apply in statutory management and voluntary administration
- ensure that when these derivatives counterparties enforce their security interest over posted margin, the claim to enforce that security interest ranks ahead of other potential claims under the Companies Act 1993 and the Personal Property Securities Act 1999.
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:
- minimise adverse effects on the rights of other creditors
- ensure the amendments do not adversely affect the coherence of existing corporate insolvency and rehabilitation regimes, or personal property securities law.
October 2017: Submissions published
We published the individual responses we received as part of the consultation in October 2017, where consent to do so was provided by respondents.
July 2017: Consultation starts
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.