Financial Market Infrastructures Bill

I present a legislative statement on the Financial Market Infrastructures Bill.

That legislative statement is published under the authority of the House and can be found on the Parliament website.

💬 Hon GRANT ROBERTSON: I move, That the Financial Market Infrastructures Bill be now read a third time.

I want to thank all of the members across the House who have contributed to the enlightening debate on this very important, if somewhat technical, piece—

💬 Hon Michael Woodhouse: Can’t wait for the plumbing references.

💬 Hon GRANT ROBERTSON: —of legislation that is in front of us now. It’s a frightening spot to see Mr Woodhouse in! So it is with great pleasure that I stand here for the final stage of this bill. To recap for members who haven’t, perhaps, been following along as closely at home for what this bill does, this is a timely piece of legislation to provide a new framework for the regulation and oversight of financial market infrastructures, or FMIs. They are an important part, if a little-known part, of our financial system.

What we have been talking about mostly in the House when we’ve been discussing this is what we call payment systems; so the ways in which transactions that we all make on our credit cards or using things like Apple Pay and so on—the systems that underpin that. But also, there are a number of other infrastructures that are not so much about what we might do with retail spending but are involved in what are called central counterparties or settlement systems, where you’ve got payments that are transferring between financial institutions, to do with things like derivatives, that take place within particular financial market infrastructures, that are often set up by banks or other financial institutions to do that work. This is how bonds are traded and this is how a lot of important underpinnings of our financial system work.

In New Zealand, we have not had a framework to govern this, that international agencies, such as the IMF, have seen as being sufficiently robust, and so that is precisely what this bill does. It makes sure that the agencies who are responsible for looking after this work, that being the Reserve Bank and the Financial Markets Authority (FMA), are both given the authority to do the work and given the powers that they need to undertake that work.

The bill particularly focuses on what are called designated FMIs. This is where these have some level of systemic importance. That is something that both the Reserve Bank and the FMA have the power to designate. But, actually, a financial market infrastructure can decide itself that it wants to be one of these, and that gets considered by those agencies, and I think that’s important.

It’s a regime based on a framework. It has flexibility to allow the regulators to do their job underneath it. It is a very important piece of legislation and I commend it to the House.

The question is that the motion be agreed to.

Thank you, Mr Speaker. This is our final session on this very interesting bill. I think the other day at the committee of the whole House, the interchange on the various technical aspects of this—

💬 Hon Grant Robertson: Enlightening.

Enlightening, as the Minister of Finance says. Of course, as he correctly points out, it’s a very technical bill. I don’t want to go through a whole host of it; obviously; we’re drawing to a close on the bill. We all support the bill. As the Minister talked about, it is a very small part of the financial sector but a very important and actually very significant part in terms of quantum of money involved in derivatives and trading of such products. The two definitions, or separations—however you want to look at it. One is over-the-counter derivatives and ones that are traded across the exchange. So we’ve got two types of derivatives; they drive financial markets. If you’re doing an interest rate swap to mitigate some of your risk, these are the types of instruments you use to actually split up the risk, whether it might be an exchange risk, it might be an interest rate risk, and use derivatives to achieve that outcome.

So the bill is about putting in place a better framework. It’s been driven from a lot of the work overseas, particularly following the Lehman bank closure and a number of other institutions in America and, to some extent, in the UK. This is very timely that we do this. We’ve talked about a lot of the detail in the committee of the whole House, but I think, in terms of trying to arrive at a place where we put in place a legislative platform that will enable us to have proper regard for these, at the moment, not as well-regulated as they could be type of instruments, I think we’ve landed in a good place. I’m glad everyone has come together across the House, and I just also want to acknowledge the officials who worked with all the committee to take us through all the detail of that. I just want to say thank you very much.

Members, the debate on this bill is interrupted and set down for resumption next sitting day. The House stands adjourned until 2 p.m. on Tuesday, 13 April 2021. Pō mārie.

Debate interrupted.

The House adjourned at 4.55 p.m.