New Zealand financial services laws are in line for a shake-up after Commerce and Consumer Affairs Minister Andrew Bayly unveiled plans to address red tape and duplication of work by regulatory bodies.

Under the current regime, some financial institutions are accountable to three regulators: the Reserve Bank of New Zealand, the Financial Markets Authority (FMA) and the Commerce Commission.

Mr Bayly says the recent introduction of the Financial Markets (Conduct of Institutions) Amendment Act 2022, commonly known as CoFI, has exacerbated the situation by introducing yet another licence requirement and imposing substantial compliance costs on financial institutions to document their “fair conduct” programs.

“Excessive layering of regulation and legislation has led to loss of coherence in governance of the financial sector and, while well intentioned, [is] failing to deliver optimal outcomes for Kiwis and businesses,” he said.

The government intends to move to a “simplified” model in which the Reserve Bank will be the prudential regulator and the FMA the conduct regulator.

“To achieve this, conduct oversight of the Credit Contracts and Consumer Finance Act currently performed by the Commerce Commission will transfer to the FMA,” Mr Bayly said.

“Many financial institutions find themselves holding multiple licenses from both the FMA and the Reserve Bank, adding to operational burden. We want to simplify this by moving to one conduct licence overseen by the FMA, and one prudential licence by the Reserve Bank.”

The Government also plans to reform CoFI and the Credit Contracts and Consumer Finance Act.

CoFI requires financial institutions, including insurers, to treat consumers fairly, and will commence next year.

Mr Bayly says CoFI serves an important purpose, but the legislation needs further examination.

“My view is that we are not sufficiently focused on taking a proportionate approach in developing fair conduct programs ... I do not want to discard CoFI, but rather perform a targeted reform to ensure that good conduct obligations are proportionate and fit for purpose, acknowledging the positive general framework.”