The regulator calls for feedback to ensure the proposals are fair and appropriate
The Financial Markets Authority (FMA) has opened consultation on its proposed standard conditions for licenses granted under the Financial Markets (Conduct of Institutions) Amendment Act 2022 (CoFI).
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Under the CoFI Act, a new regulatory regime will be introduced for the conduct of registered banks, licensed insurers, and licensed non-bank deposit takers, with an overarching principle to treat consumers fairly.
Once the new regime comes into force, probably in early 2025, the institutions will need to operate under a “financial institution licence” issued by the FMA, with all licence holders and each of their authorised bodies required to comply with the standard conditions.
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The FMA is proposing six standard conditions for licences:
- satisfy the various requirements for licences, such as directors and senior managers meeting fit and proper criteria
- notify FMA in writing within 10 working days of implementing any material change to the nature of its financial institution service
- provide FMA with the information the regulator needs to monitor the institution’s ongoing capability to effectively perform its service
- ensure that the system or process it outsources is capable of performing the service to the standard required to meet its market services licensee obligations
- have and maintain a business continuity plan that is appropriate for the scale and scope of its financial institution service, and notify FMA of any event that materially impacts the operational resilience of its critical technology systems
- create in a timely manner and maintain adequate records in relation to its service
The standard conditions are consistent with those imposed on other licences issued by the FMA, such as financial advice provider licences.
“We strongly encourage industry and stakeholder feedback on our consultations to ensure our regulatory proposals are fair and appropriate,” said Clare Bolingford, FMA director of banking and insurance. “The standard conditions for financial institutions are especially important given these businesses play such an important role in New Zealanders’ everyday lives.”
FMA said licence conditions may impose limits or restrictions on the services that are covered by the licence or impose conditions in relation to the licensing assessment requirements, to ensure licence holders continue to meet those requirements, and to help the regulator effectively monitor the licensed population.
The FMA expects to start accepting licence applications in mid-2023, about 18 months prior to the new legislation coming into force.
Submissions close on Sept. 7 at 5pm, with the final standard conditions to be announced by FMA at a later date.
