tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Saturday, March 2nd, 10:32AM

Mortgages

rss
Latest Headlines

Simple, streamlined regulation the golden prize

The prize to be achieved from simplifying and standardising financial services regulation is significant, law firm MinterEllisonRuddWatts says.

Friday, February 2nd 2024, 2:43PM 1 Comment

The comments come after Commerce and Consumers Affairs Minister Andrew Bayly this week said he was prioritising work on changes to the Credit Contracts and Consumer Finance Act (CCCFA) and Conduct of Financial Institutions (CoFI) legislation.

As part of the work Bayly will be transferring regulatory functions, so the RBNZ becomes the prudential regulator and the FMA the conduct regulator.

The FMA will issue a single licence covering conduct issues for financial institutions, while also clearly defining obligations within the Financial Markets Conduct Act, meaning easier reference for growing or contracting financial institutions.

And duplication will be removed in areas of initial fit-and-proper person assessments required by both the FMA and RBNZ but both entities to report separately on cyber resilience.

He says his concern about because a large financial institution may need to apply for up to five licences from the FMA because of legislative and regulatory changes made over successive governments, which led to the architecture of the financial services sector losing some of its coherence and clarity.

CoFI in its current form is an example. “It introduces another licence requirement and imposes substantial compliance costs which are not proportionate to the issues the legislation intends to address, Bayly says.

MinterEllisonRuddWatts previously criticised the country’s regulatory architecture saying it has increasingly strayed away from its intended ‘twin peaks’ model to a crossover of mandates between the three regulators – the RBNZ, FMA and Commerce Commission. “The upshot was a confusing regulatory landscape, overlapping guidance and a multiple-licence system for financial institutions.”

The law firm agreed with Bayly in saying this created significant operational burdens counterproductive to Kiwis and their businesses.

“The financial services sector represents a significant part of the New Zealand economy, and should be a large contributor to economic growth,” the law firm says. “However, achieving such growth is dependent upon a regulatory structure which promotes innovation and flexibility in financial markets, avoids unnecessary compliance costs, and facilitates the development of fair, efficient and transparent financial markets.”

FMA prepares for regulatory changes

The FMA says it wants to change this. Chief executive Samantha Barrass says using the core principals at the heart of CoFI can result in a simple and streamlined approach for conduct regulation across the piece.

“The fair conduct principle that sits at the heart of CoFI, that a ‘financial institution must treat consumers fairly’ sets out that the fundamental components of fair conduct are:

  • paying due regard to a consumers interests;
  • acting ethically, transparently and in good faith;
  • assisting customers to make informed decisions;
  • ensuring relevant services and associated products meet the requirements and objectives of likely consumers; and
  • not subjecting consumers to unfair pressure or tactics or undue influence. 

Barrass says taking this approach to the conduct of all financial services means that an outcomes-based regime can provide flexibility, support innovation and avoid box ticking. “It promotes a supervisory relationship that facilitates proactive and proportionate engagement. It also enables us to minimise regulatory burden.” 

She says additional guidance and engagement will be provided for small firms to ensure they have everything they need to be successful.

“It obviously costs more of our resources but makes things less costly and more straightforward for firms. We will be working with both the Government and the sector to do this.”

Responsibility not scrutiny 

She took exception to feedback from some in the sector who believe the FMA will be subjecting firms’ fair conduct programmes to significant scrutiny during the licensing process.

“I want to be clear that this has never been our intention and has never been a part of our planning. It’s not for us to go through your fair conduct programme line by line. We’re not going to be signing them off.  The responsibility for these programmes sits with the board of the institutions.

“It is for you to right-size your fair conduct programme or your CoFI application for your business, especially for smaller firms.” 

The FMA, Barrass says, will be flexible and respond to different business models throughout the licensing process and in its supervision and monitoring approach. “The FMA has never had a one size fits all approach to its work, taking an approach based on engagement and working with the sector.“

She says aligning credit regulation with an outcomes-based approach and fair conduct rules will provide clear and constructive benefits. “It will provide regulatory certainty and efficiency. It will help ease burden while ensuring a range of monitoring, supervisory and enforcement tools to manage poor conduct in the sector. It will also allow expectations to evolve as new technologies, products and business models emerge.” 

Bad practices

Pointing to more prescriptive approaches to regulation, Barrass says the risk of ‘tick box’ regulation is real.

“It contributes to regulators failing to spot emerging risk, despite their cross-sector vantage point. It increases the extent to which regulation can cut across innovation, including changes that improve outcomes for consumers, markets and society. Unfortunately it allows some to design technical compliance models that fail to achieve the consumer and market aims of the regulatory model.”

Rules and other regulations are of course a critical part of the framework. These outcomes don’t replace our legislation – they are not new rules, she says.  

“We don’t need to go back too far to recognise the market failures that have cut across consumer outcomes and clean markets. Just a cursory look at the enforcement action we have taken in the past year, demonstrates the risk posed by those who can’t or won’t deliver fair consumer outcomes or support clean markets.” 

Barrass says the FMA made it clear last year that it is alert to any practices by providers that lead to high pressure sales, not just commissions, not just sales-based remuneration.  It acted following a review of the classification of wholesale customers. She says these are good examples of the FMA beginning to consider how outcomes-focused regulation will work in practice. We weren’t simply focused on a narrow range of practices. We were looking at risks to the outcome that ‘consumers can trust providers to act in their interests, she says. 

To prepare for regulatory changes, the FMA will be looking into pilot approaches in the coming year with a small number of firms, and invited industry members to help inform the FMA’s approach.

Barrass says industry engagement with the FMA’s monitoring teams will facilitate “a palpable shift to outcomes rather than rules and compliance with rules.”

Tags: CoFI

« Mortgage and loan repayment arrears rise DTIs will be hard on start-ups »

Special Offers

Comments from our readers

On 21 February 2024 at 9:06 am Andy the adviser said:
At long last - some sensible ideas. If only the bureaucrats had listened to the advisers back in 2008 when this all kicked off.

In the meantime, the cloth has already been cut. Will advisers be reimbursed for the extra costs incurred in chasing stupidity? Will our annual compliance costs be considered and reduced back to 2008 levels?

Or will the ticket clippers remain in place, maintaining a financial services industry where most of the participants (and the money) are in compliance and management, rather than at the coal face giving much-needed advice to consumers?

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
Subscribe Now

Mortgage Rates Newsletter

Daily Weekly

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.45 7.05 6.85
ANZ 8.64 7.99 7.49 7.35
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.39 6.89 6.75
ASB Bank 8.64 7.39 6.89 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.29 6.85 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 ▼7.89 ▼7.45 ▼7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - ▼7.09 - -
Co-operative Bank - Owner Occ 8.40 ▼7.29 6.89 6.75
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 ▼7.79 7.39 7.25
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.85 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.59 7.29
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.35 7.89 7.65
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.35 6.89 6.75
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.90 7.39 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.30 7.89 7.69
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.95 7.45 7.29
SBS Bank Special - 7.45 6.95 6.79
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 7.05 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.19 7.55 7.55
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.39 6.75 6.75
Unity 8.64 6.99 6.85 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 7.15 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.45 7.37 6.77

Last updated: 1 March 2024 10:00am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
 
Site by Web Developer and eyelovedesign.com