The Government has announced a suite of regulatory changes to streamline the current complex regulatory environment for the Financial Services sector including reducing the number of regulators, revising the Credit Contracts and Consumer Finance Act (CCCFA), and simplifying the licensing framework.
One key part of the announcement was to provide clarity to the market that financial institutions should progress with their applications for licenses as required in the Financial Markets (Conduct of Institutions) Act (CoFI). Speaking at the Financial Services Council’s Regulatory Outlook 2024 breakfast (31 January), Commerce and Consumer Affairs Minister Andrew Bayly acknowledged the importance of ensuring good outcomes for consumers within the financial services sector, while indicating that CoFI will be streamlined, and setting an expectation that the FMA will provide clear guidance around the minimum requirements for developing Fair Conduct Programmes that are fit for purpose. This guidance will be welcomed by the sector – and financial institutions will be hoping this is to be released sooner rather than later.
The message to continue with CoFI implementation and license applications is in contrast to a pre-election announcement that CoFI would be repealed. Following engagement with the industry, the Government has instead announced a wider review of the way the financial services sector is regulated. They propose to consolidate the number of regulators to a pure ‘twin-peaks’ model where the Reserve Bank of New Zealand will be responsible for prudential regulation, and the FMA will be responsible for conduct regulation, with one license for conduct – this will mean a shift for the regulation of the CCCFA from the Commerce Commission to the FMA. These changes will reduce complexity, licensing burden, and ongoing regulatory uncertainty which, in our view makes sense. The Government’s review of the CCCFA is a chance to make sensible changes that protect vulnerable customers and provide clarity to lenders. For their part, the FMA, CEO Samantha Barrett said, is ready to implement the changes the Government has outlined.
KPMG believes a review of the regulatory framework will be beneficial to the sector, and presents an opportunity to learn from other jurisdictions about what works and what doesn’t – the ‘devil will be in the detail’ so to speak, and getting this right will be paramount to ensuring the new framework is fit-for-purpose for New Zealand – this shouldn’t be rushed. By working together across the sector, we can build a financial services industry that prioritises responsible conduct, innovation, and fuels New Zealand’s prosperity.
If you have any questions on how KPMG can help you prepare for CoFI, or how we can support you on CCCFA and regulatory change, please don’t hesitate to contact Kate Stewart, Ceri Horwill, or Malcolm Bruce.
