Review into financial services

The government says it will review financial services regulations, “ensuring clarity and cutting red tape for institutions and Kiwis".

Andrew Bayly, Minister for Commerce and Consumer Affairs, announced at the action at Financial Services Council meeting on January 31.

The reforms will address aspects of regulation concerning financial market conduct, duplication when it comes to key regulators and 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,” says Bayly, pictured.

“At present, some financial institutions find themselves accountable to three regulators – the Reserve Bank, Financial Markets Authority [FMA] and Commerce Commission.”

The aim is to move to a simplified model with the Reserve Bank being the prudential regulator and a single conduct regulator being the FMA’s remit.

 To achieve this, conduct oversight of the Credit Contracts and Consumer Finance Act (CCCFA), which is currently performed by the Commerce Commission, will transfer to the FMA.

“Many financial institutions find themselves holding multiple licences from both the FMA and Reserve Bank 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.”

Bayly has also announced plans to reform the Financial Markets (Conduct of Institutions) Amendment Act (CoFI) and CCCFA.

“The CoFI serves an important purpose to support good financial outcomes for consumers, but needs streamlining so financial institutions have certainty and flexibility to get on with the business of delivering for their customers,” he says.

“The primary responsibility for developing appropriate fair conduct programmes [FCPs] lies with the board and management of the financial institution.

“This means that it’s up to the financial institution to identify key areas of risk and tailor them appropriately. However, it is my expectation 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 200 customers compared to a bank with two million, but the importance of fair treatment remains the same.”

Bayly wants the CCCFA to 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.”

Bayly adds that it’s his intention to simplify, modernise and digitise the Companies Act because aspects of it are 20 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.”