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The FMA’s role in the 2016 New Zealand FSAP

The IMF’s 2016 FSAP review will involve a joint effort between the Reserve Bank of New Zealand (RBNZ), the FMA, Treasury and the Ministry of Business, Innovation and Employment (MBIE).

While the FMA’s part in the overall FSAP review (which is focused on assessing New Zealand’s financial stability) is secondary to RBNZ’s it still represents a major piece of work for the FMA.

The FMA will contribute to the voluntary (non-graded) components of the FSAP.

The methodology and IOSCO principles used for the IMF’s FSAP assessment of securities regulation has been overhauled since New Zealand’s last FSAP review in 2004.  In addition, significant changes have been made to New Zealand’s securities regime over the same period (see below for detail). In light of this, it is important and useful to undertake a fresh assessment against the new international standards.

The FMA has agreed with the IMF that a limited assessment ‘technical note review’ of New Zealand’s securities regulation is more appropriate for this FSAP review, bearing in mind the FMA and the New Zealand securities market are still working through the transition to the new FMC Act regime.

The IMF has acknowledged they could not conduct a full detailed assessment of the effectiveness of our new regime, when many market participants haven’t completed the licensing process yet and there is little practical experience under the new regime.

This technical note review will involve a non-graded assessment and informal benchmarking against the relevant principles from the 38 IOSCO Objectives and Principles of Securities Regulation

The scope and focus of the IMF’s review of New Zealand’s securities regulation has yet to be fully defined and will be the subject of dialogue with the IMF in the first half of 2016 – with the review of NZ’s securities regulation and the FMA occurring on the IMF’s second or main mission in November 2016.

However, by way of example of the breadth of the IOSCO principles, they cover a wide range of areas such as:

  • the effectiveness of the regulator – both in terms of its enforcement powers and monitoring and supervision tools
  • how effective the licensing process is, the robustness of the assessment criteria and whether there are clear rules for market participants to follow
  • how the regulator intends to deal with and monitor market participants, and manage and mitigate market and systemic risks.  

The IMF’s technical note report on New Zealand’s securities regulation will include their findings and recommendations for areas where they think improvements are needed.  This report will be considered by the FMA and Government and we will be given the opportunity to respond. Any publication of the final findings and recommendations will be made in early 2017.