Quarterly Statement by the Council of Financial Regulators – December 2022
The Council of Financial Regulators (CoFR) held its quarterly meeting on Monday 12 December 2022. The meeting was chaired by Financial Markets Authority Chief Executive Samantha Barrass.
The Council took this opportunity to review the progress made over the course of the year, including on each of its priority themes, and to endorse plans for 2023.
In July the Reserve Bank of New Zealand Act came into force, providing statutory recognition for the Council and its function to ‘facilitate co-operation and co-ordination between members of the council to support effective and responsive regulation of the financial system in New Zealand.’
The Council collaborated with MBIE as it led an investigation into the initial implementation of recent changes to the Credit Contracts and Consumer Finance Act 2003 (CCCFA). This work led to responsive changes to CCCFA regulations and related code guidance.
Throughout the year CoFR continued to grow its connections with industry bodies from across the financial system. This is particularly important given the volume of regulatory change underway. The Council continues work to assess, categorise and monitor emerging risks to New Zealand’s financial system.
CoFR established the monitoring and coordination forum to improve information sharing and understanding of operational activity in areas of mutual interest.
CoFR has identified five priority themes, where inter-agency work is particularly important. During the year, cyber resilience was added as a priority theme and the conduct and governance theme was discontinued as co-ordination in this area moved to ‘business as usual’ in the participating agencies.
On Climate the Council noted that the regular communication across its members had led to better sequencing of regulatory initiatives. For example, the RBNZ deferred its Climate Survey to H1 2023 to allow industry to focus on the consultation for Climate Related Disclosure Standards in August 2022. The Council also noted the collaboration on the various climate related initiatives over the course of the year, including the Emissions Reduction Plan; National Adaptation Plan; Climate Related Disclosures – exposure draft and record keeping guidance; and on climate related stress testing. Co-operation and co-ordination will continue on these, and other, climate related initiatives into 2023.
Cyber resilience was added as a priority theme in March. The Council has approved domestic cross-agency protocols for responding to a cyber incident and supported the development of the Trans-Tasman equivalent. There has also been co-operation on the development of draft cybersecurity standards for Financial Market Infrastructures. The focus for 2023 will be on various initiatives to enhance regulators’ ability to assess the level of cyber resilience in the financial system.
The Council noted research the RBNZ had done during the year on access to capital for Māori and further plans to explore how the barriers identified might be addressed. In addition, the Council noted plans to reinforce CoFR’s consumer vulnerability framework in how the FMA monitors conduct. The focus for 2023 will be to increase our collaboration across a broader range of work areas relating to financial inclusion.
Digital and Innovation
There have been 67 requests for regulatory guidance from various fintech businesses and start-ups via fintech.govt.nz since it was established in March 2021; 28 of these in 2022. This year the Council also developed and published a joint statement regarding crypto-assets. In 2023 CoFR intends to continue to provide regulatory guidance to fintech businesses and start-ups, and also to support RBNZ’s work to develop a monitoring framework regarding the impact of crypto-assets and other innovations on New Zealand’s financial system.
The Council renamed this priority theme to better capture its intent. It is important that the regulation of the financial sector is effective and the cost of complying with regulation is proportionate to the outcomes sought. The Council agreed to seek a pragmatic approach towards implementation of regulation across regulated entities of various sizes, where the legislation allowed. CoFR also noted the improvements made during the year to the Regulatory Initiatives Calendar. The Council agreed that the collaborative work across members to improve this product should continue, in close consultation with the industry.
In closing, the Council reaffirmed its commitment to continue to work closely with its regulated industries and with each other, to support the effective and responsive regulation of the financial system in New Zealand.