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Reserve Bank And FMA Consult On Implementing New Law To Safeguard The ’plumbing’ Of The Financial System

Groups with an interest in the financial market transactions and payments are being asked for their views on how a new law governing the ‘plumbing’ of the financial system should be implemented.

The Financial Market Infrastructure Act became law in May 2021. The new Act governs Financial Market Infrastructures (FMIs) – a set of critical systems that are sometimes referred to as the plumbing of the financial system. These systems allow electronic payments and financial market transactions to occur.

The Reserve Bank of New Zealand – Te Pūtea Matua and the Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko are together the regulator of FMIs under the Act. The Act will be implemented over an approximately 18-month transitional period.

The RBNZ and FMA are encouraging industry groups and other stakeholders to give their views on how systemically important FMIs will be identified and the proposed approach to developing standards, with the release of consultation documents.

“Well-managed FMIs support well-functioning financial markets and are vital to a sound and efficient financial system,” Reserve Bank Deputy Governor Geoff Bascand said. 

“It is also true, however, that problems or disruptions at an FMI could lead to severe adverse impacts to financial markets, the wider financial system and the economy as whole. The enhanced regulatory framework established by the Act provides scrutiny of FMIs and powers for regulators to intervene if needed to avoid significant damage to the financial system from problems with an FMI, its operator, or its participants,” he said.

FMA Director of Capital Markets, Sarah Vrede, said: “We are continuing to work closely with the Reserve Bank on the implementation of this legislation and are now in a position to provide more detail on our joint approach to the development of regulatory requirements.”

The RBNZ and FMA are publishing an overview of the plan to implement the FMI Act and the two consultation papers:


We invite feedback by 20 September 2021.
How to provide feedback: fmiconsultation@rbnz.govt.nz

What are FMIs and why are they important?

  • FMIs are often described as the plumbing of the financial system. Like other important infrastructure, such as the electricity grid or the road system, FMIs are essential for the wellbeing of New Zealanders.
  • FMIs are systems that facilitate non-cash payments and financial market transactions and are therefore essential for the day-to-day operation of the economy. More precisely, FMIs are multilateral systems that provide clearing, settlement, and reporting services in relation to payments, securities, derivatives and other financial transactions.
  • There are several types of FMIs, including payment systems, securities settlement systems, central securities depositories, central counterparties, and trade repositories.
  • New Zealanders depend on FMIs in their daily economic lives, although in most cases they will not be directly aware of this because FMIs typically operate behind the scenes with banks and other financial sector institutions providing the interface to their customers. The inter-bank payment system operated by the Reserve Bank– the Exchange Settlement Account System (ESAS) – is one example of an FMI operating in New Zealand.

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