New Zealand: Financial Sector Assessment Program: Technical Note-Fund Management-Regulation, Supervision, and Systemic Risk Monitoring

IMF Staff Country Reports, May 10, 2017

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New Zealand: Financial Sector Assessment Program: Technical Note-Fund Management-Regulation, Supervision, and Systemic Risk Monitoring

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Bibliographic details

• Published: May 10, 2017
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9781475599855.002

Summary

• This Technical Note presents an assessment of Regulation, Supervision and Systemic Risk Monitoring in New Zealand.
• The overall regulatory framework for asset management is well developed, but would benefit from some enhancements to prevent the buildup of risks.
• The provision of custody services does not require a license in New Zealand, and custodians therefore fall outside the direct supervision of the Financial Markets Authority (FMA).
• Custodians are neither subject to prudential requirements nor to ongoing supervision by any other authority.
• Given that custodians perform key functions regarding safeguarding investors’ assets, the government should require that these entities be licensed and subject to ongoing supervision by the FMA.

Key Findings

• Regulatory framework for asset management: well developed, but needs enhancements to prevent risk buildup.
• Custody services:
  • No licensing requirement for custodians in New Zealand.
  • Custodians fall outside direct supervision of the Financial Markets Authority (FMA).
  • Custodians are not subject to prudential requirements.
  • Custodians are not subject to ongoing supervision by any other authority.
• Systemic risk monitoring: assessment indicates gaps related to oversight of entities performing key investor-safeguarding functions.

Policy Recommendations

• Require custodians who provide custody services to be licensed.
• Subject licensed custodians to ongoing supervision by the Financial Markets Authority (FMA).
• Enhance the regulatory framework for asset management to prevent the buildup of risks (specific enhancements are detailed in the Technical Note).

Subject Areas and Keywords

• Subject: Asset and liability management, Asset management, Asset valuation, Financial regulation and supervision, Financial services, Liquidity risk
• Keywords: Asia and Pacific, Asset management, Asset valuation, business models, CR, FMA staff, FMC Act, Global, governing document, investment strategy, ISCR, license application, Liquidity risk, MIS assets, MIS manager, MIS offer documents

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