The International Monetary Fund has published the findings of its assessment of the New Zealand financial system and recommended tougher regulation for the sector
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New Zealand’s financial system is generally strong but regulatory supervision and discipline could be strengthened according the to IMF.
In its first major report on New Zealand’s financial system stability since 2003-2004, the IMF said there is vulnerability due to exposure to the housing market, the dairy industry, and high reliance on wholesale offshore funding.
The publication of the report has been welcomed by the Financial Markets Authority, formed 5 years ago and noted by the IMF report as part of a “major overhaul” of securities regulation in New Zealand which also included the introduction of the Financial Markets Conduct Act 2013 (FMCA) and a review of the Financial Advisers Act.
“The regulation of NZ’s financial markets has been significantly enhanced over the last decade and this has required significant work from the industry, the FMA and MBIE. It is good to see the IMF’s assessment clearly reflects that,” said Rob Everett, Chief Executive of the FMA.
Despite the potential risks to stability, the IMF’s report says that the banking system is resilient to severe shocks but recommends strengthening of the macroprudential framework.
Of particular note, is the dominance of the four main banks which have similar business models which make them reliant on, and exposed to, housing loans.
The IMF also suggests that the RBNZ should toughen its supervision of the market to enable supervisors to be more proactive in terms of regulatory discipline.
RBNZ should be given extra resources for the supervision and regulation of banks, insurance companies and financial market infrastructures, the IMF recommends.
The FMA says that it is considering all the proposals alongside its fellow regulators, the Reserve Bank, MBIE and the Treasury.
In its first major report on New Zealand’s financial system stability since 2003-2004, the IMF said there is vulnerability due to exposure to the housing market, the dairy industry, and high reliance on wholesale offshore funding.
The publication of the report has been welcomed by the Financial Markets Authority, formed 5 years ago and noted by the IMF report as part of a “major overhaul” of securities regulation in New Zealand which also included the introduction of the Financial Markets Conduct Act 2013 (FMCA) and a review of the Financial Advisers Act.
“The regulation of NZ’s financial markets has been significantly enhanced over the last decade and this has required significant work from the industry, the FMA and MBIE. It is good to see the IMF’s assessment clearly reflects that,” said Rob Everett, Chief Executive of the FMA.
Despite the potential risks to stability, the IMF’s report says that the banking system is resilient to severe shocks but recommends strengthening of the macroprudential framework.
Of particular note, is the dominance of the four main banks which have similar business models which make them reliant on, and exposed to, housing loans.
The IMF also suggests that the RBNZ should toughen its supervision of the market to enable supervisors to be more proactive in terms of regulatory discipline.
RBNZ should be given extra resources for the supervision and regulation of banks, insurance companies and financial market infrastructures, the IMF recommends.
The FMA says that it is considering all the proposals alongside its fellow regulators, the Reserve Bank, MBIE and the Treasury.
