The Financial Market Infrastructures Act 2021 (FMI Act) became law on 10 May 2021.
The FMI Act establishes 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. 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 Financial Market Infrastructures Act 2021 Commencement Order 2023 was made on 22 May 2023. This order brings the FMI Act fully into force on 1 March 2024.
The Financial Market Infrastructures Regulations 2023 came into force on 3 July 2023. These regulations support the implementation of the FMI Act. They:
- slightly extend the standards making power in the FMI Act to enable a robust and efficient framework to regulate overseas FMIs.
- establish a cost recovery fee of $39,130 (GST exclusive) to process designation applications.
Read the Cabinet paper and associated Regulatory Impact Statement for the regulations
The standards for designated FMIs were issued on 27 July 2023 and come into effect starting from 1 March 2024.