Nonetheless, Bayly feared CoFI would lump institutions with more paperwork, which would ultimately cost their customers.
He’s still wary of ensuring the regime doesn’t treat a small credit union the same as a big bank.
However, he’s aware CoFI has been years in the making and many of the 100-odd institutions that need to apply to the FMA for a conduct licence before March next year are well down this path.
He’s asked the FMA to give smaller institutions, less resourced to do the work, guidance on how to respond proportionately.
Licences to be consolidated
Speaking at a Financial Services Council event this morning, Bayly said he ultimately wanted to remove any duplication from the slew of requirements financial institutions need to meet to get various licences to operate.
“Many financial institutions find themselves holding multiple licences from both the FMA and the RBNZ, adding to operational burden,” Bayly said.
“We want to simplify this by moving to one conduct licence overseen by the FMA, and one prudential licence by the RBNZ.”
Accordingly, Bayly wanted the FMA to become responsible for ensuring companies comply with the Credit Contracts and Consumer Finance Act (CCCFA). Currently, the Commerce Commission oversees this.
It’s yet to be seen exactly how everything would be consolidated, what legal or regulatory changes would be required, and what this would make of all the work being done to prepare for CoFI.
CCCFA to be reviewed again
Bayly is honouring his pre-election promise, and a clause in the National-Act coalition agreement, to review the CCCFA.
The law, aimed at protecting vulnerable borrowers from predatory lenders, has been criticised for being too cumbersome.
Indeed, the previous government relaxed rules in May 2023 and July 2022, acknowledging changes it made in December 2021 resulted in “unintended impacts”.
Bayly worried the CCCFA was still seeing vulnerable borrowers turn to “unregulated high-cost sources” to get loans, and sensible borrowers struggle to access credit.
His top priority was to “remove prescriptive affordability requirements for lower-risk lending”.
Thereafter, he would do a more substantive review of the CCCFA, including looking at its penalty and disclosure regime and its relationship with CoFI.
Other issues
Setting the scene for what he wanted to achieve in government, Bayly addressed other issues of interest to the financial services sector.
He said he wanted to modernise the 30-year-old Companies Act.
“This is an important longer-term project, and I expect to work on it for a while,” he said.
Longer-term, Bayly was interested in exploring potential changes to KiwiSaver to help people save more for their retirements.
He stopped short of mentioning his pre-election policy to make it easier for KiwiSaver members to diversify their investments across a range of KiwiSaver providers.
Bayly also said he wanted to explore potential changes to capital markets setting to “help New Zealand businesses and investors thrive”.
And, he wanted to look at insurance contract law to give insurers and policyholders more certainty around the deals they strike.
Jenee Tibshraeny is the Herald’s Wellington business editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
