1. News and resources
  2. IMF 2016 review of NZ
  3. IMF feedback

IMF feedback

Page last updated: 1 Dec 2016

Feedback from the IMF indicates the FMA has managed the FMC Act transition effectively, has a good range of enforcement tools and makes good use of them. This reflects progress made since the last mission, when New Zealand’s securities regulation performed relatively poorly against many of the IOSCO principles. 

Overall the IMF’s reports are favourable, providing a very positive assessment with helpful commentary and constructive recommendations.  The IMF thinks the reform of securities market regulation (including establishment of the FMA , introduction of the FMC Act and the FMA’s engagement and enforcement activities) have  “significantly improved” the New Zealand framework.  These reforms have included licensing providers of certain products, including managers of retail funds.

There are no real surprises in the IMF's report and, as expected, there are some areas where the IMF recommends we direct further attention.  The areas relevant to the FMA are supervisors, custodians, wholesale asset management, insurance conduct and financial markets infrastructure. 

The following table provides a brief summary of the IMF’s feedback, as provided through their Financial System Stability Assessment and technical notes

We will also publish a summary list of the IMF’s recommendations shortly.

Fund Management: Regulation, supervision and systemic risk monitoring

The FMA is the conduct regulator of the financial sector.  The FMA’s role includes licensing and supervising fund management businesses. This includes requirements they must meet for governance, capability, controls, systems and processes, and financial resources.

  • Supervision of the asset management industry has recently started and is still developing. The FMA completed initial licensing of MIS managers under the new regulatory regime in December 2016 and is now in the process of refining the risk-based approach to supervise these entities. The licensing process has allowed staff to gain insight into the sector and is assisting in the identification of the major risks to be monitored through the subsequent ongoing supervision.
  • The overall regulatory framework for asset management is well developed, but would benefit from some enhancements to prevent the build-up of risks.  The regulatory perimeter could be reviewed to include wholesale asset managers and custodians, whose activities will become more relevant as the asset management industry matures, bringing potential new risks.
  • Private entities called Financial Markets Supervisors are now licensed and expected to play a role in the monitoring of MIS managers.  The FMA should define its supervisory approach to asset management activities giving significant consideration to the expectations set on Supervisors. There are challenges and benefits from leveraging off the work of Supervisors and the FMA should keep the risks and appropriate responses under constant review.
  • The FMA has a comprehensive and flexible set of tools to influence financial conduct, and has a significant track record of enforcement action.


  • There is a need for more focus on the regulation of insurance intermediaries and insurance conduct, which is likely to require increased resources. The government and the FMA have been moving in this direction under recent legislation and in the FMA’s supervisory initiatives, including on high life insurance commissions.
  • The current approach takes account of the relatively limited conduct risks in insurance, given the product range, while self-regulation by industry bodies is developing and there is a well-established system for disputes resolution.
  • However there is a need, which the government is addressing, to enhance the deliberately low intensity regime currently applying to most independent insurance advisers and brokers. The current regime does not include even basic competence and disclosure requirements.
  • There is a need to extend the range of conduct of business requirements specific to insurance beyond the current focus on advice, and to ensure that the appropriate requirements apply to all insurance activity, including sales without advice and ancillary sales.
  • The FMA functions with clear objectives within a generally sound framework of powers and processes and its responsibilities relative to those of government are clearly differentiated. The FMA would benefit from enhanced enforcement powers and would need to add insurance-specific expertise and maybe greater overall resources.

Regulation and Oversight of Financial Market Infrastructures (FMIs)

FMIs provide the central infrastructure (comprising institutions, rules, procedures, risk management frameworks, and technical platforms) to clear and settle payments, securities, and derivatives transactions. Together with the Reserve Bank of New Zealand (RBNZ), the FMA jointly oversees FMIs in New Zealand.

  • Domestic cooperation between the RBNZ and the FMA is effective for day to day oversight and supervision of the designated settlement systems. The regulators bring different perspectives to issues given the different statutory objectives, with the FMA primarily responsible for conduct and the RBNZ for financial stability. Inconsistencies and gaps in the supervisory approach are avoided through frequent and constructive communication and consultation.
  • FMIs in New Zealand seem compliant with the different requirements in the CPSS IOSCO Principles for Financial Market Infrastructures (PFMI principles) to a large extent. But further work is needed to ensure full compliance, in particular with the ‘newer’ requirements.
  • The RBNZ and FMA currently lack sufficient legal powers to identify and address risks building up in FMIs, partly because the regime is voluntary and the authorities do not have the appropriate toolkit to pursue their oversight objectives.
  • Recognising the shortcomings of the current regime, the RBNZ and FMA are proposing to develop a new regime. These proposed reforms will bring New Zealand broadly on par with international standards.