Review of Financial Products and Providers
Contents
Introduction
In 2005 the government announced a review of the regulation of non-bank Financial Products and Providers ("the Review") to develop an effective and consistent regulatory framework and promote confidence and participation in sound and efficient financial markets.
The Review is timely given a number of separate reviews of financial products and providers were planned or were being carried out. The key objective for the Review is to develop an effective and consistent framework for the regulation of non-bank financial institutions and financial products. The aim of the framework is to promote confidence and participation in financial markets by investors and institutions, and which results in a sound and efficient non-bank financial sector.
The Review is essentially a stocktake of current regulation and an evaluation of whether that regulation needs to be improved. The government is not presuming that the current system is wrong, but financial markets are dynamic and the regulatory system needs to provide for this.
The Review builds on the business law reform programme the government has been undertaking over the last five years. Under the Review of Regulatory Frameworks the government is focusing on the removal of unnecessary regulatory constraints on economic growth as well as the continuous quality improvement of regulatory frameworks and processes. An important component of this is ensuring a quality process in regulatory design. The Review meets all of these objectives. It is intended that the Review:
- Remove unnecessary costs on business and makes the regulatory regime more flexible in some areas;
- Make regulation more transparent and effective;
- Ensure that where it imposes costs on business that they be proportionate to the risks posed, and do not impose unnecessary burdens on business;
- Lead to regulatory design which is responsive to business, based on sound analysis and actually achieves our objective of encouraging investment in New Zealand’s financial markets by promoting a sound and efficient financial system in which the public has confidence; and
- Achieve the above goals more effectively through consulting with business and consumer groups early in the process on both the problem identification and problem development.
In addition to the Review, Treasury led concurrent work on how the regulatory regime can best be administered, including whether changes to the existing domestic regulatory bodies were required to achieve that.
Scope of the Review of Financial Products and Providers
The Review considers:
- registration of Financial Institutions (Financial Service Providers);
- insurance;
- supervision of issuers;
- consumer dispute resolution and redress;
- non-bank deposit-takers (friendly societies, credit unions, building societies, industrial and provident societies, and finance companies);
- collective investment schemes (including superannuation);
- mutuals' governance;
- securities offerings; and
- platforms and portfolio management services.
This work will be informed by the number of separate reviews that are planned or are already being carried out. For example, the government's response to the Law Commission Report on Life Insurance, the Financial Intermediaries Taskforce, the review of credit unions.
The review also takes into account developments in global financial regulation and assesses the opportunities to further coordinate and harmonise New Zealand's financial regulation with that in Australia, where appropriate.
Process for the Review
The Ministry of Economic Development is leading this review. We are taking an open and consultative approach and encourage the financial sector to participate in the review.
The Review has been undertaken in four stages. As the Review progresses, we will update this website to inform you of progress and to make you aware of any opportunities for participation in the Review.
Stage One
Stage One of the Review is now complete. It outlined a framework for the Review, an assessment of the current regulatory regime against the framework, and some initial thinking on the problems and high-level directions for reform. This stage was based on the information the government had received through previous consultation and from additional input that we sought from key stakeholders. We then made an assessment to guide the initial direction for the Review.
Stage Two
Stage Two of the Review is now complete. It entailed the development of draft options for reform. We developed these options for reform in conjunction with advisory groups. The advisory groups were made up of people from key industry organisations, industry participants, professional organisations and government bodies. The participants were not expected to attend as representatives of their organisations, but as people with industry expertise and knowledge, to provide advice to us on options development, costs and benefits of various proposals and implementation.
Stage Three
Stage Three of the Review is now closed. This involved the release of discussion documents for public consultation on options for reform. The discussion documents were released on 31 August 2006, and submissions closed 1 December 2006. There were nine discussion documents, which covered:
- Overview of the Review and Registration of Financial Institutions (Financial Service Providers);
- Insurance;
- Supervision of Issuers;
- Consumer Dispute Resolution and Redress;
- Non-Bank Deposit-Takers;
- Collective Investment Schemes;
- Mutuals' Governance;
- Securities Offerings; and
- Platforms and Portfolio Management Services.
Stage Four
Stage Four is now closed. Over 140 submissions were received from organisations and individuals, many of them addressing a number of the nine discussion documents released. The Ministry, and other government agencies involved in the Review, have finished analysing these submissions and a summary of the submissions is available.
Cabinet Decisions on the Review of Financial Products and Providers
Policy recommendations have been considered by Cabinet on the first phase of the Review. The Minister of Commerce has announced changes to the financial sector arising from (or linked to) the RFPP. Changes are set out in Cabinet papers agreed to by Cabinet in June 2007. A two-phased approach is being taken to introduce legislation to implement the changes. See Cabinet Decisions on the Review of Financial Products and Providers.
Contacts
MED welcomes contact and contributions from all parties interested in the Review at all stages of the Review. You can also get involved by contacting your industry organisation, which will have been invited to participate in the Review.
If you would like to send in comments or to arrange meetings with officials, please contact MED by email at fppreview@med.govt.nz or by post at:
Review of Financial Products and Providers
Financial Sector Team
Ministry of Economic Development
33 Bowen Street
PO Box 1473
Wellington
Documents
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