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Promoting financial stability

8 November 2016

Promoting financial stability in the rapidly evolving financial services landscape

The Reserve Bank remains focused on preserving financial stability, while facilitating innovation and improved efficiency in the rapidly-evolving payments space, Deputy Governor Grant Spencer said today.

In a speech to the Payments NZ conference, Mr Spencer said the payments landscape around the world is changing dramatically as customers demand more real-time payment options, innovative new technologies are developed and more players enter the market.

“Alongside the rapid pace of innovation and technology change, there are some serious risks, which policy makers around the world are responding to. These include cybersecurity threats, concentration risks from outsourcing to third-party suppliers, and the disruption that can occur with payment network outages. If Financial Market Infrastructures (FMIs) are not well managed, they can become a conduit for the contagion of shocks across the financial system.

“The rapidly changing payments landscape provides challenges and opportunities. For the Reserve Bank, the main focus is on preserving financial stability while also facilitating innovation and improved efficiency.”

In New Zealand, the Reserve Bank and Financial Markets Authority (FMA), as the joint regulators of designated systems, have been developing a new oversight framework for FMIs.

“We believe the proposed oversight framework would promote FMI stability and efficiency in a changing environment,” Mr Spencer said.

Mr Spencer says the oversight framework and proposals are still subject to Cabinet approval. The next step in the process would be to prepare new legislation. The Reserve Bank would issue an exposure draft for consultation early next year.

“A key feature of the proposed new framework is crisis management. We are proposing that the Reserve Bank and FMA would have a tools to respond if a systemically important FMI fails or is about to fail. In such a situation, we want to facilitate an orderly recovery or resolution so as to minimise potential disruptions to the financial system.”

Mr Spencer also provided an update of the Reserve Bank’s project to replace two important parts of the New Zealand payments infrastructure — the Exchange Settlement Account System (ESAS) and NZClear. At this point, these upgrades are due to be completed by the end of 2018.


Financial Market Infrastructures (FMIs) are the channels through which financial institutions, governments, businesses and individuals transmit money and financial instruments. They are generally sophisticated systems that centralise certain activities, handling significant transaction volumes and sizeable monetary values. They include payment systems, settlement systems, central counterparties, central securities depositories, and trade repositories. For a variety of reasons, individual FMIs can become systemically important, in that their failure could have significant adverse consequences for the financial system.

More information

• Speech: Innovation with resilience – a Central Banker’s perspective

Financial market infrastructure oversight

Bulletin article: Disruption or distraction? How digitisation is changing New Zealand banks and core banking systems.


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