The FSAP is a comprehensive assessment of the country’s financial sector and was coordinated by the Reserve Bank of New Zealand (RBNZ) on behalf of the members of New Zealand’s Council of Financial Regulators, which includes the FMA, the Treasury and MBIE.
New Zealand’s prudential and securities regulation was tested against international principles and practices.
Taking part in the IMF assessment programme is an important way for New Zealand to show we want to be recognised as an international destination for investor capital. Seeing how our system stacks up against international best practice means investors both here and abroad can have confidence in the regulatory framework we have been building over the last decade.
The regulations covering our financial system, and in particular our securities markets, have been transformed since the IMF’s last FSAP review. And not only as a result of the shortcomings reported in the last FSAP. The impacts of the Global Financial Crisis and the recommendations from the Capital Markets Development Taskforce have also contributed to a huge overhaul of our regulatory framework.
New Zealand now has a twin peaks oversight model for the financial system, with RBNZ taking on prudential supervision of the banks and non-bank deposit takers (NBDTs), and the establishment of the FMA to supervise securities and financial markets conduct.
The IMF’s 2016 FSAP review was a joint effort between the 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) was secondary to RBNZ’s, was still a major piece of work for the FMA.
The IMF conducted two missions to New Zealand – the first in mid-August 2016, (focussed on reviewing the banking and insurance sectors, and financial market infrastructure) and the second in the first three weeks of November, when they reviewed securities regulation.
As the new regulatory regime for securities under the Financial Markets Conduct Act wasn’t fully implemented until the end of 2016, the IMF’s review recognised that the FMA and New Zealand’s financial markets were still in transition.
The IMF has acknowledged they could not conduct a full detailed assessment of the effectiveness of our new regime, when many market participants hadn’t yet completed the licensing process and there was little practical experience under the new regime.
The FMA agreed with the IMF that instead of a full detailed assessment with a rating, the IMF would conduct a review of New Zealand securities regulation and provide ‘technical notes’ on its findings. These notes assess how our regime measures up against best practice and international principles.