The Reserve Bank has published an exposure draft of the Financial Market Infrastructure Bill and is seeking feedback from stakeholders.
Submissions on the draft will close at 5pm on 26 September 2019. It is expected that the bill will be introduced into Parliament later in 2019.
The draft Bill establishes a standalone Act that will replace the current regime, which is contained in Parts 5B and 5C of the Reserve Bank of New Zealand Act 1989.
"This draft bill comes as a result of three rounds of public consultation - the first two on the proposed framework as a whole, and the third was specifically on crisis management powers. As a result we now have a draft bill that we think hits the mark in terms of powers and coverage, and we’re keen to hear if others agree," says Geoff Bascand, Deputy Governor and GM Financial Stability.
Financial Market Infrastructures (FMIs) are multilateral systems among participating institutions, including the operators and users of the systems, used for payment, clearing, settling or recording of financial transactions. The participants of FMIs are usually banks and other types of financial institution, but in respect of payment systems can also include individuals, retailers, and other types of businesses.
A robust framework for the regulation and supervision of financial market infrastructures is essential to the promotion of a stable and efficient financial system, yet the existing regulatory regime for FMIs is limited.
"FMIs can be subject to market failures resulting in, amongst other things, an insufficient focus on risk management or inadequate investment in underlying infrastructure. The existing legislative regime has significant deficiencies and is not consistent with international best practice, and so it’s right that we work to strengthen it," Mr Bascand says.