E ngā mana, e ngā maunga, e ngā hau e whā, tēnā koutou katoa
Nō Ingarangi ōku tupuna
Nō reira, ka mihi ki te whenua o Greenwich me te awa Thames.
Ko Ngāti Rānana ki te Pitonga te iwi
I whānau mai au i Rānana
Engari i te wā e tamariki ana ahau, i tipu ake au, ki Ōtautahi
Ko Te Whanganui ā-Tara taku kāinga noho nāianei
Ko Samantha Barrass taku ingoa
Ko taku mahi ki Te Mana Tātai Hokohoko, ko te Mana Whakahaere
Nō reira, tēnā koutou, tēnā koutou, tēnā koutou katoa
Ka huri au ki te reo Ingarangi
Kia ora and thank you for inviting me to speak here today.
As this is my very first Financial Services Federation conference, I thought it would be appropriate to introduce myself, as I have done in my mihi. My story is that of a child born in the UK whose family moved to Christchurch when I was young.
While I have pursued my career and had my family in the UK and Europe for the past 20 odd years, I returned to New Zealand in 2022, to take up the role of Chief Executive of the Financial Markets Authority.
There is never a dull moment being head of a financial regulator, not least because of the degree of regulatory change that the sector has experienced in recent years. For the FMA, our remit has expanded, and is expanding, considerably. This includes:
- the introduction of the new financial advice regime in 2019,
- implementation of climate related disclosures standards,
- conduct of financial institutions legislation coming into force early next year,
- the Contracts of Insurance Bill just out of Select Committee,
- and of course, the transfer of responsibility for credit law shifting from the Commerce Commission to the FMA.
Amidst all this change, it is good to be here as part of the FMA’s growing relationship with non-bank lenders and finance companies. Of course, this is a relationship that will be an increasingly important one once we formally hold responsibility for the CCCFA. In preparation for this, you will have seen engagement between the FMA and your industry body step up this year. This engagement is part of our desire to develop a solid, enduring relationship with the FSF and you, its members.
I’m sure I am preaching to the converted when I say that the financial services sector plays a critical role in enabling New Zealanders’ lives. Lending, and the work you do, is indeed a key component of this, enabling New Zealanders to borrow for the things they value, such as buying a car or a house, or for other important things that they need in their lives.
As lenders, you help make that happen. Our role, as a conduct regulator, will be to ensure customers are treated responsibly and that financial service providers act with integrity in that process.
Before I go further, it is important to make clear that the changes recently announced by Minister Bayly will require legislation, and this has yet to be introduced into Parliament. The select committee process will allow the sector and members of the public to tell lawmakers what they think of the legislation. These are matters and decisions for these lawmakers and for Ministers. Our role will be to implement whatever is passed into law.
And until the law is passed and comes into force, the Commerce Commission remains the regulator for the CCCFA. While you are seeing the FMA in more engagement activities organised by the Commission, and we are now working closely with the Commission in many ways to ensure a smooth and effective transfer, you should continue to engage with the Commission as normal until the transfer officially takes effect.
While the policy and legislative process is still in train, and we are a wee way off the implementation phase of the CCCFA transfer, I thought I would take this opportunity to introduce you to the FMA and describe what you might expect from us as a regulator.
The FMA is a relatively young regulator but created following longstanding issues that came to a head during the Global Financial Crisis. Those in the sector at the time will have been acutely aware of the effects of the finance company collapses, with the risks and harms exposed, unmitigated by market forces. These conditions created a powerful argument for regulation to support Mum and Dad investors and quality capital markets in New Zealand. The FMA was created out of those ashes.
In this context, the CCCFA transfer is not simply about moving around the deck chairs. I believe, and hope, that having a single conduct regulator for the financial markets will simplify the regulatory landscape across the sector.
As a conduct regulator, we hold a different set of regulatory tools compared to the Commission’s role as a competition and consumer regulator.
The Financial Markets Conduct Act, alongside other laws, gives us a broad toolkit, which allows us to provide flexible and proportionate regulation of firms within our remit. This includes providers of financial advice, registered banks, non-bank deposit takers, insurers, and soon, of course, non-bank lenders and finance companies.
The Minister has already signalled that a market services licence will replace the certification regime as part of the CCCFA transfer. Legislation is intended to provide that firms who are certified will automatically be deemed to hold this new licence when the law comes into force.
Put simply, the aim is to lift and shift certified firms to reduce the regulatory burden and compliance costs from the outset and ensure a smooth transfer.
So, what does it mean to be licensed and supervised by the FMA?
In our engagement with firms, our overall approach is to build a greater understanding of why firms do what they do. If we start with our licensing model, this normally involves assessing applications from market participants who want to carry out certain activities, such as providing financial advice, or operating as an insurer or deposit taker. With the transfer of the CCCFA, there will however be no application or assessment in order to support a seamless transition between regulatory models. Unlike certification, licences do not expire.
The duties and obligations firms will have are those that already exist under the CCCFA, such as being a responsible lender.
The FMA supervises licensed firms in line with our overarching statutory objective to promote and facilitate the development of fair, efficient and transparent markets. This will also extend to the CCCFA’s primary purpose of consumer protection. Our supervision activity – where we monitor adherence to regulatory and legislative requirements by financial market participants – is integral to this outcome.
Think of supervision as an enhanced relationship with the regulator. It’s fluid and proactive, and forms part of our engagement-led approach. We are here to assist and guide, not just enforce.
The implementation of the new financial advice regime is a good example of this. The Monitoring Insights Report for Financial Advice Providers we released earlier this year reflects the output from our supervisory work with the advice sector. In practice, this work involves things like recurring meetings, desk based and onsite reviews, and studies looking at a single issue across multiple firms, which we call thematic reviews. Throughout these activities, our focus is on identifying, monitoring and assessing any opportunities, risks and gaps related to our shared objectives.
A more targeted form of engagement is the monitoring we undertake on key aspects of compliance and risk. This involves reviewing and assessing the compliance, competency and conduct of financial market participants.
We take a risk-based approach, which means we focus our activity where we have the greatest opportunity of reducing harm to investors and consumers. This means we actively focus on only a portion of our regulated population in any given year.
An engagement-led approach means that we look to build solid, long-lasting relationships with firms and the industry bodies that represent them. A good example of this is the work we’ve done, particularly with smaller deposit takers, to help them prepare for the new Conduct of Financial Institutions regime.
It can be one on one engagement with firms, but it can also include speeches like this one, as well as industry roundtables on themes we have picked up on across the industry, such as the use of artificial intelligence in financial services, or consumer and industry perceptions of fairness in anticipation of our conduct regime coming into force next year.
Of course, in order to build enduring relationships, we need an industry body that has the support and the financial backing of its members. A properly resourced industry body pays dividends when it comes to ensuring the views and needs of firms are appropriately reflected in our regulatory approach, such as in the course of issuing guidance, or when we discuss the practical implications of policy and legislative changes with key decision makers. I encourage you to work with and through your industry body to get the most out of the FMA’s engagement-led approach.
An engagement-led approach is clearly important to us and a part of how we like to show up as a regulator.
For that to work well it needs to be complemented by a clear understanding that we also use the range of enforcement tools available to us when necessary. This includes taking regulatory action (such as public warnings, direction orders and stop orders) in relation to non-compliance.
It’s important to emphasise here that our action will be proportionate to the misconduct to achieve an appropriate market outcome or change in behaviour. In the event of market misconduct, we may intervene on an informal basis or at a low level. However, we will also take strong action and hold individuals and entities accountable when they break the law and fail to meet the standards that are expected of them.
If there is one message I want you to take away from what our supervisory approach will look like, it is that being licenced is an ongoing and enduring relationship between the regulator and the regulated entity.
In the spirit of understanding our ‘why’, I want to describe my personal view of why we do what we do. The FMA, and I, are incredibly focused on regulation that genuinely matters and delivers for New Zealanders. My underlying philosophy is that we cannot simply regulate for the sake of regulating. Regulation needs to pass the ‘so what’ test, as well as enable innovation. By keeping an eye on unnecessary regulatory burden, we can ensure our regulatory approach is achieving the outcomes we, and New Zealanders, expect.
That’s why we want to ensure the FMA’s focus is not just on compliance but on what we are actually trying to achieve. That is the ultimate way in which we will deliver well focused regulation, keep costs down and make sure we are not unnecessarily cutting across innovation.
As I draw to a close, I want to acknowledge some of the positive interactions with your sector to date.
The Financial Services Federation’s engagement with the Council of Financial Regulators, or CoFR, has been helpful for us as we start turning our minds to our incoming credit responsibilities. These engagements help us better understand your priorities and also your concerns, especially during this period of significant regulatory change.
I also want to take a moment to acknowledge the work I understand is being done to build on relations between lenders and the financial mentoring sector. These consumer groups will become increasingly important to us as we move closer to the CCCFA transfer, so it is good to see growing engagement in this space.
I have set out in my remarks the approach you can expect from the FMA in the years ahead. It’s also inevitably going to be the case that there will be times in the years ahead where the FMA and the industry will not agree.
That’s to be expected. But while we may not always agree, having an avenue for dialogue is an essential foundation for constructive discussions for the benefit of New Zealanders who need to borrow for the important things in life. Our relationship endures beyond times of agreement and disagreement. Our doors will always be open.
And on that note, I want to say thank you again for having me at your conference, to open this dialogue. I’m looking forward to engaging further with you in the months and years to come.
Thank you and I welcome any questions you may have.
