The Financial Market Infrastructures Act 2021 (FMI Act) became law on 10 May 2021.
The FMI Act establishes a new and enhanced regulatory regime for FMIs that brings New Zealand in line with our peer jurisdictions and reflects international best practice. Under the FMI Act the joint regulators recommend, to respective Ministers, designation of FMIs – this is different to current designations in place under the RBNZ Act. There are two ways that an FMI can become designated. First, the joint regulators can determine that an FMI is systemically important and therefore must be designated. Second, an FMI can apply for designation status on their own accord to access certain legal protections around netting and settlement finality.
For payment systems, the Reserve Bank is the sole regulator. For all other types of FMIs, the Reserve Bank and the FMA will act jointly as the regulator.
The FMI Act then provides functions and powers of the joint regulators with 3 main components:
- a set of information gathering and investigative powers to support ongoing oversight and monitoring of all FMIs;
- the power to set regulatory requirements for designated FMIs, such as issuing standards, reviewing contingency plans, and overseeing system rules (including rules regarding netting and settlements); and
- a set of powers to manage systemically important FMIs that are facing distress (i.e. crisis management powers)
The joint regulators FMI Act implementation plan can be found here. For more information about how to apply to become a designated FMI and to view the latest proposals to update the supervisory regime for FMIs, please visit the RBNZ website