NZ prudential regulation well adapted
(21 August 2013 – New Zealand) Effective prudential regulation is a crucial component of a sound and efficient financial system, the Reserve Bank of New Zealand (RBNZ)’s Head of Prudential Supervision, Toby Fiennes said.
Fiennes spoke to the Law and Economics Association of New Zealand on Wednesday and said that international regulatory framework has developed rapidly over recent years, with New Zealand responding accordingly.
"The global financial crisis has led banking regulators around the world to revisit their whole approach. Here in New Zealand, the finance company failures and the repercussions from the Canterbury earthquakes have underlined the importance of sound regulation that can help prevent failures."
"We have strengthened and built on the key features of our regime, including an early tightening of liquidity standards, reflecting the adverse liquidity shock experienced during the global financial crisis."
"We have been fast adopters of the tougher Basel III capital standards, with some tailoring to New Zealand conditions. We have also extended our prudential oversight regime to cover insurers and non-bank deposit takers (NBDTs)."
"The New Zealand approach places significant emphasis on self-discipline and with regulatory requirements we have tried to minimise complexity while ensuring strong capital and liquidity buffers," Fiennes said.
Fiennes said New Zealand’s financial system remains in fundamentally good shape, with the banking sector maintaining high levels of capital and adequate liquidity buffers, the core payments systems generally operating smoothly and the insurance sector positioning itself well for future shocks.
"As well as strengthening the oversight of systemically important payment and settlement systems, the Reserve Bank will also look for opportunities to simplify regulatory regimes and harmonise them across sectors."