Government needs to better fund FMA: Industry

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The financial services sector fears the Government is pulling back on its funding of the Financial Markets Authority (FMA) at the same time as it is loading it with greater responsibilities.

Wednesday, May 25th 2022, 7:36AM 1 Comment

by Eric Frykberg

In effect, they say the state contribution to the FMA process is diminishing as a share of its total running costs.

This is despite headline figures showing an increase in funding in the last budget.

The chief executive of the Financial Services Council Richard Klipin says the state share of the costs will slip over four years from 17% to 16%.

The rest of the budget, 84% will be made up by levies on the organisations being regulated.

“Having a well-run and well-funded regulator is completely important for New Zealand,” Klipin said.

“We are completely comfortable with that. The problem is, who pays what portion of the costs?”

Klipin said overall funding for the FMA was increasing but the Crown share of that funding was slipping.

He said it was the Crown's responsibility to adequately fund all of its agencies. And while there was a co-funding model that the finance sector was happy to support, he would like to see greater funding from the Crown.

“A well funded regulator is a key part of the landscape in New Zealand, and the financial sector is happy to pay its share. But the proportion paid by the Crown has been reducing over time while the total funding has been increasing over time.

“We don't think that is fair or reasonable.”

Several new responsibilities have been loaded onto the FMA. They include implementation of the controversial Conduct of Financial Institutions (CoFI), law, which is still going through parliament. They also include making sure that company reports on their greenhouse gas emissions are intellectually robust.

The Budget recognised that these obligations would cost. It gave the FMA operating and capital grants totalling $2.1 million to pay for monitoring climate change disclosures. It further gave $4.1 million for the operating and capital costs of administering CoFI. Both sums are spread over four years.

But Klipin says overall, the share of state funding is decreasing, and he would be pressing Government ministers to change this.

The total budget for the FMA is being increased by  $15.596 million per annum to a total of $76.40 over several years.

Levies payable by financial institutions will go up to meet the lion's share of those costs. Really large ones will pay levies of $2.9 million a year in four years time. Even smaller institutions with assets between $10 billion and $50 billion will pay $880,000 by 2026.

Klipin said the finance industry was willing to play its part, but so should the Crown.

“The government needs to fund the regulator, because the FMA is a really important part of our system,” he said.

“The FMA needs to be properly funded.”

Tags: FMA

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