Financial Market Infrastructures Bill submission

8 May 2020

On 6 May, our Chief Executive Steve Wiggins presented Payments NZ’s submission for the Financial Market Infrastructures (FMI) Bill before Parliament’s Finance and Expenditure Select Committee.

One of the key purposes of the bill is to promote the maintenance of a sound and efficient financial system; and avoid significant damage to the financial system that could result from problems with an FMI, an operator of an FMI, or a participant of an FMI.

Payments NZ governs two of the payment systems that have been proposed for designation as financial market infrastructures under this bill – Settlement before Interchange (SBI) and the High Value Clearing System (HVCS). Our submission focused on three key areas we asked the committee to consider when determining the final drafting and make-up of the bill.

Those areas are:

  • Reiterating that the Reserve Bank’s current oversight framework of the payments system works well, including for SBI and HVCS, both of which are likely to be designated under the bill. So, it is important that any new legislation builds on this good position.
  • The inclusion of the principle that you can only be held accountable for matters you have direct responsibility over. For example, Payments NZ governs the payments system, including SBI and HVCS, but does not own or operate the infrastructure used by those systems. Infrastructure providers therefore need to be considered separately to any designation responsibilities of Payments NZ. Our clearing system governance and management is undertaken by way of rules, which are effectively a multilateral contract binding only the Participants who are party to them.
  • That there should be a separate regime for systemically important pure payment systems with the Reserve Bank having clearer and more direct powers over providers of key infrastructure, so it can ensure that critical payment services continue to be provided in all circumstances.

You can download and read our full submission below.