The Government will reform financial services regulations, ensuring clarity and cutting red tape for both institutions and Kiwis, Commerce and Consumer Affairs Minister Andrew Bayly announced at a Financial Services Council conference today.
The reforms will address aspects of financial market conduct regulation and areas of overlap and duplication by the key regulators, in addition to simplifying licensing requirements.
“Excessive layering of regulation and legislation has led to loss of coherence in governance of the financial sector, and while well intentioned, are failing to deliver optimal outcomes for Kiwis and businesses.
“At present some financial institutions find themselves accountable to three regulators; namely the Reserve Bank of New Zealand (RBNZ), Financial Markets Authority (FMA) and Commerce Commission.
“We will move to a simplified model, with the RBNZ being the prudential regulator, and a single conduct regulator being the FMA. To achieve this, conduct oversight of the Credit Contracts and Consumer Finance Act (CCCFA) currently performed by the Commerce Commission will transfer to the FMA.
“Many financial institutions find themselves holding multiple licenses from both the FMA and the RBNZ, adding to operational burden. We want to simplify this by moving to one conduct licence overseen by the FMA, and one prudential licence by the RBNZ.”
Mr Bayly also announced plans to reform the Financial Markets (Conduct of Institutions) Amendment Act (CoFI) and the CCCFA at the conference today.
“CoFI serves an important purpose to support good financial outcomes for consumers, but it needs streamlining so financial institutions have certainty and flexibility to get on with the business of delivering for their customers.
“The primary responsibility for developing appropriate Fair Conduct Programmes (FCP) lies with the board and management of the financial institution. This means that it is up to the financial institution to identify key areas of risk and tailor them appropriately. However, it is my expectation that the FMA will provide clear guidance as to the minimum requirements to ensure the FCPs are sufficiently developed.
“For example, a FCP will look different for a credit union with two hundred customers compared to a bank with two million, but the importance of fair treatment remains the same”, Mr Bayly said.
The CCCFA will also be reformed, to ensure vulnerable consumers are protected without preventing Kiwis getting the credit they can afford.
“These over-prescriptive consumer lending laws have led to Kiwis missing out on loans.
“This is another important step in meeting our coalition agreement with ACT, to rewrite the CCCFA to protect vulnerable consumers without unnecessarily limiting access to credit. The Government is proposing a two-step process to amend the CCCFA, which changes to be announced over the coming months.”
Mr Bayly also stated that it is his intention to simplify, modernise and digitise the Companies Act, as aspects of it are thirty years out of date and could be improved.
“These reforms will improve the business environment for financial institutions so that we can get the economy back on track.”