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Major disruptions in world events over the last year have not dented New Zealanders’ confidence in financial markets. The FMA today released its annual survey into the public’s attitude to financial markets. The survey shows that confidence has risen significantly to 65% among all respondents, from 56% in 2016.
Investor confidence in the markets has reached its highest level (69%) since the FMA started the survey in 2013, when the score was 58%. Confidence in the effective regulation of the markets has improved to 69% from 63% last year.
Rob Everett, FMA Chief Executive, said: “Since the survey started 5 years ago the portion of investors who said they were not confident has shrunk from 32% to 20%. All these scores show we are starting to see a shift in the public’s historic mistrust about markets and financial services. Investors seem to have started paying attention to the presence of regulators, as well as ripples from world events, when expressing confidence.”
Confidence rose most sharply among people with investments. Investors with a superannuation scheme (81%) managed funds (80%) and shares (78%) were the most confident.
Mr Everett said that sentiment had typically been a big ingredient in these confidence scores. “Prior to 2015 confidence built quite steadily and then, with market ructions last year, it dipped. While market performance has been broadly positive this year, there’s been plenty of upheaval and uncertainty from Brexit and other international events.
“Despite these issues, confidence seems to have been more resilient. One of the factors influencing perceptions is likely to be the transformation of the regulation of financial service providers, completed in December 2016.
“We hope to see a continuing trend of investors retaining confidence in the conduct within, and integrity of the markets, even if the performance of their investments goes up and down.”
Over half of investors find the investment materials they receive helpful in making informed decisions. The scores are much higher for people investing in shares (67%) or managed funds (65%) than they are for investors in bonds (51%) or KiwiSaver (51%).
“Considering managed funds and KiwiSaver have similar characteristics and both are licensed managed investment schemes, there’s clearly some improvements that could help make KiwiSaver communication materials more useful for investors. Good conduct includes ensuring your customers are fully-informed about the risks and benefits of a product and they understand how market performance and costs impact the final outcome,” said Mr Everett.
One of the FMA’s statutory objectives is to promote the confident participation in NZ’s markets. The FMA commissions and publishes this survey every year as part of its efforts to measure levels of confidence in financial markets. The survey also tests the levels of confidence in the effective regulation of the markets.
| A FMA release || may 29, 2017 |||
The Reserve Bank and Financial Markets Authority have welcomed the release of a new code to promote good practice in the international foreign exchange market.
The new Global Code of Conduct for the Foreign Exchange Market was released in London by the Bank for International Settlements last night. It was developed by central banks and foreign exchange market participants from 16 international jurisdictions.
“The code of conduct applies to both those buying and selling foreign exchange and is a principles-based code rather than a rules-based code,” said Reserve Bank Deputy Governor Grant Spencer.
“It aims to create greater confidence in the foreign exchange market and ensure it is functioning in the interests of all market participants.
“To comply with the code, firms will have to take practical steps such as training their staff and putting in place enhanced policies and procedures. Certainly the Reserve Bank would be following the code of conduct in its foreign exchange dealings,” concluded Mr Spencer.
Garth Stanish, FMA Director of Capital Markets, encouraged industry participants to adopt the code.
“The code is relevant to all parts of the wholesale FX industry that fall within the FMA’s conduct regulation. We support its objectives, which include the promotion of a robust, fair, liquid, open, and appropriately transparent foreign exchange market.”
More information:Read the Global Code of Conduct for the Foreign Exchange Market
| A RBNZ release || may 26, 2017 |||
Forecasting is a valuable part of the monetary policy process, helping the Bank plan for the future, communicate its current understanding and intentions, and react to unexpected events, Reserve Bank Assistant Governor and Head of Economics Dr John McDermott said today.
During a speech to the New Zealand Manufacturers and Exporters Association (NZMEA) in Christchurch, Dr McDermott outlined the reasons why the Bank regularly produces and publishes forecasts and Official Cash Rate (OCR) projections.
“Forecasting is not supposed to be prophecy; rather, it is about being precise about our thinking. It requires the Bank to be rigorous, unbiased, and open to new ideas in formulating and implementing monetary policy. Being numerically precise about our view of the future allows us to test ideas, which in turn accelerates our ability to learn and understand what is going on,” said Dr McDermott.
Dr McDermott said the economy is populated with thousands of households and businesses responding to their own particular circumstances and opportunities, and therefore the range of possible outcomes is vast. Because of the complexity of the economy and the developments continually affecting it, the Bank’s forecasts are inevitably subject to change.
“The Bank’s forecasts are highly conditional on the information currently available and are revised when important additional information comes to light. In recent Monetary Policy Statements the Bank has published scenarios to illustrate how the forecasts would change should the economy develop differently,” said Dr McDermott.
Forecasts also help people form expectations of the future and therefore guide current actions. By building people’s understanding of how the Bank is likely to react to news, and by explaining its forecasts and policy stance, the predictability of monetary policy decisions is enhanced and policy uncertainty is reduced.
More information: The value of forecasting in an uncertain world
| A RBNZ release || May 15, 2017 |||
The International Monetary Fund (IMF) has declared New Zealand’s banking system to be resilient, but nevertheless recommended ways to improve the strength of the country’s financial sector and the regulatory framework.
In releasing the findings from its Financial Sector Assessment Programme (FSAP) overnight, the IMF said that the banking system is well-placed to manage risks and vulnerabilities associated with current developments in the housing sector, the high level of household debt, and low dairy prices. The FSAP included a range of ‘stress tests’ of the large New Zealand banks.
The report states that New Zealand has a good institutional framework for macroprudential policy and that LVR restrictions have generated financial stability benefits, although it could be strengthened further. They also recognise a number of important positive features about the Reserve Bank’s supervisory framework, including the strong Trans-Tasman relationships.
Recommendations for improvements include increasing the intensity of supervision for both the banking and insurance sectors, within the Reserve Bank’s “three-pillar” approach to prudential regulation that is based on self, market and regulatory discipline.
The IMF has endorsed the Reserve Bank’s current legislative proposal to improve the regulation and oversight of financial market infrastructures, as well as the importance of reviewing the bank capital framework.
The Reserve Bank is considering the FSAP findings and recommendations in its areas of responsibility and the degree to which these might further its statutory purpose of promoting a sound and efficient financial system.
A forthcoming article in the Reserve Bank Bulletin will explain the 2016 FSAP process and its findings and recommendations in more detail.
More information:· Financial Sector Assessment Programme· IMF Financial System Stability Assessment· Minister of Finance’s media statement· Financial Markets Authority media statement· IMF web page
| A RBNZ release || May 09, 2017 ||
The Reserve Bank today published an issues paper that seeks views about the regulation of capital adequacy for banks.
The Bank is conducting a broad ranging capital review, as foreshadowed in a speech by Deputy Governor Grant Spencer in March.
The review aims to identify the most appropriate capital adequacy framework, taking into account experience with the current framework and international developments.
The review will consider the definition of regulatory capital, the measurement of risk-weighted exposures, and the minimum capital ratios that apply to locally incorporated banks.
The issues paper marks the first public consultation as part of the review. The Bank is seeking feedback about the topics covered by the issues paper. Responses for the consultation close on 9 June 2017.
More information: Review of the capital adequacy framework for registered banks
| A RBNZ release || May 01, 2017 |||
Deputy Governor Geoff Bascand has been appointed Head of Financial Stability and Deputy Chief Executive of the Reserve Bank, Governor Graeme Wheeler and Acting Governor-designate Grant Spencer announced today.
Mr Bascand will take up the role on 27 September, replacing Mr Spencer, who will be Acting Governor for six months from that date, after Mr Wheeler’s term as Governor ends.
Mr Bascand is currently a Deputy Governor and the Bank’s Head of Operations. Prior to joining the Bank in 2013, he was Government Statistician and Chief Executive, Statistics New Zealand. He previously worked in senior management roles in the Department of Labour and the New Zealand Treasury, and was a staff economist at the International Monetary Fund.
"Geoff brings considerable leadership experience, economics and public policy background to the role. Through his participation in the Bank’s Governing Committee, financial policy committees, and chairing of the Bank’s Assets and Liabilities Committee, Geoff is very familiar with the Bank’s work programmes and policy issues in the area of Financial Stability,” Mr Wheeler said.
A search firm has been appointed to undertake a search for the Head of Operations position, which will be at Assistant Governor level, and the role will be advertised in May. The Reserve Bank Board of Directors’ recruitment process to identify a successor to Mr Wheeler is to commence later in the year.
| A RBNZ release || April 26, 2017 |||
Regulatory Reform Minister, Paul Goldsmith, and Parliamentary Under-Secretary for Regulatory Reform, David Seymour, say changes to Regulatory Impact Analysis (RIA) requirements will lead to better informed decision making by Parliament and the Government.
“Our laws and regulations have a profound effect on our economic performance, the operation of business, and the well-being of every New Zealander,” says Mr Seymour.
“High quality policy advice is the foundation of robust government decision-making. Poor quality regulation unnecessarily increases the costs of doing business and reduces New Zealanders’ freedom.
“Although the quality of RIA from government departments has improved over time, it is still highly variable.”
The changes to the RIA requirements are designed to:
Encourage earlier and broader engagement on proposals by agencies
“These improvements are in line with the findings of a newly released report by Castalia that was commissioned by the Treasury and will help ensure the government regulates in the right way, at the right time and only when necessary,” says Mr Seymour.
“The changes also reflect feedback from the business community suggesting costs of regulation are insufficiently considered.”
The changes to RIA requirements are a key part of the Government’s new Regulatory Management Strategy, also announced today.
“At the core of the regulatory management strategy is the government agencies’ role as regulatory stewards, and the expectation that they will actively monitor and maintain regulation to ensure it delivers the intended benefits,” says Mr Goldsmith.
“Rapid societal, market and technological changes are increasing the demand for more sophisticated and nimble regulatory solutions, strategies and regulators.
“While we have a well-established reputation for our fiscal management and reporting disciplines, the challenge is to build that same level of discipline around government regulation.
“Good regulation is an important driver of national competitiveness, productivity and living standards, which all contribute to the Government’s clear economic plan for building a faster-growing economy with more jobs and rising incomes to support New Zealanders and their families.”
The Castalia report that informed the RIA changes can be found HERE.
The Regulatory Management Strategy can be found HERE.
| A beehive release | April 21, 2017 |||
The Reserve Bank today released a new edition of its popular guide to managing the risks involved in saving and investing.
‘Upside, downside: A guide to risk for savers and investors’ was commissioned by the Reserve Bank and written by investment commentator Mary Holm for ordinary New Zealanders.
Since original publication in 2012 the guide has received two significant revisions to take account of changing KiwiSaver rules and other developments.
“I’m delighted to be able to bring this book up to date for 2017 and beyond, and hope the updated version proves as useful for a wide range of New Zealanders as its predecessors,” Mary Holm said.
‘Upside, Downside: a guide to risk for savers and investors’ is available free of charge, only as a downloadable PDF from the Reserve Bank website.
More information: Upside, Downside: a guide to risk for savers and investors (PDF 1.3MB)
| A RBNZ release || April 13, 2017 |||
BNZ parent National Australia Bank is major force in introducing Islamic banking
Rugbyman Sonny Williams made it clear that he was no longer going to prance around pitches attired in kit promoting usury.
Rugby officials instantly kicked for touch. They heaped upon themselves sackcloth and ashes.
All Black branding sponsor Bank of New Zealand kept quiet.
It might have been viewed though as another publicity opportunity.
BNZ parent National Australia Bank is a major force in opening up Australasia to Islamic investors from the Gulf and Southeast Asia that seek to adhere to religious principles such as bans on interest and gambling.
If the BNZ had applied islamic banking principles in taking a share of ownership in the assets in which it had invested its clients’ money, it might still be owned in New Zealand.
Instead it charged interest on its loans. This was reinforced by seeking to impose penalties when the borrowers failed to pay their interest.
Interest and penalties are both taboo under islamic financing.
Islamic banking turns on joint risk-sharing as opposed to risk-transfer, which islamics describe as usury.
Islamic mortgages centre on the bank taking the responsibility of purchasing a property and then re-selling it to the buyer. This arrangement enables the buyer to repay the bank in installments in which process the bank receives also its profit.
This arrangement is designed to ensure that the bank takes its share of the risk, in this case owning the building, and recovering its profit, the installment payments, while shouldering its continued share of the risk.
The point being that at no stage is interest (usury) levied.
Nobody gets paid for renting out money. Islamic banking embraces risk-sharing as opposed to risk-transfer.
Islamic banking principles though continue to underpin Occidental merchant banking in which the bank takes on the risk of a venture by taking on ownership.
Money as money must not be used to make more money.
So why did islamic financing become sidelined by the Western model which centres on the diametric opposite practice of using money to make money via the charging of interest?
The problem was that the degree of concensus required to arrive at a common valuation of the asset to be financed and thus the proportion of risk involved began to become increasingly cumbersome in the face of the standardised model developed in the Occident.
In Europe charging a cut and dried level of interest regardless of the success of the asset or otherwise became so much easier to implement.
Curiously, the other two Abrahamist/book religions, Judaism and Christianity, have at one stage or another shaken from their shoes the dust of usury and tested instead the risk-balancing islamic system..
But the standardisation of administration and thus the efficiency inherent in the Western technique in the end compensated for its own drawback in which the advantages are seen to be weighted in favour of the lender, the bank.
It is said that Williams was converted in the French port of Toulon nearly 10 years ago while he was a local team member.
Toulon’s cathedral was once a mosque.
Pressure will now be being brought onto the athlete to lead by example.
The issue has so far been viewed exclusively in moral and/or sports gear outfitting terms.
It should also be seen, as perhaps Williams intends, as the start of a wider evaluation of islamic finance.
One such source of interest might be from those who have enlisted in class actions against banks over the bank infliction on them of penalties.
Islamic finance principals hold that penalties may not be levied.
Instead failures to perform to the original agreement require that donations be made to charities – and not to the bank.
| From The MSCNewsWire reporters' desk || Friday 14 April 2017 |||
Major Chinese banks operating in New Zealand continued to make significant inroads last year, with a strong rise in overall assets across all three as they look to cash in on the growing trade ties between the two nations.
Trade between China and New Zealand has tripled to $23 billion since the free trade agreement between the two nations came into force in 2008.
The money flow looks set to continue after New Zealand Prime Minister Bill English and China Premier Li Keqiang last week signed off a series of co-operation deals spanning trade, customs, travel and climate change and agreed official talks to upgrade the existing FTA between the nations will start on April 25.
However, while all three banks have primarily targeted corporate clients since setting up shop here, they are also gradually increasing their residential mortgage portfolios, benefiting from a massive housing boom.
China Construction Bank of New Zealand reported total assets of $887.8 million in the year to December 31, up from $401.9m in the prior year.
It also reported a net profit of $1.8m, up from a net loss of $4.7m in the prior year.
The bank significantly increased its residential mortgage portfolio, which jumped to $381.6m versus $72m in the prior year. Its corporate loan portfolio was $363.6m versus $235m in the year to December 31, 2015.
Bank of China New Zealand reported total assets of $514.5m, up from $208.4m in the prior 12 months.
BOC NZ set up shop in November 2014. Corporate loans jumped to $309.4m from $144.5m. It also turned to the housing market with loans of $33.8m at the balance date versus none in the prior year.
Finally, Industrial and Commercial Bank of China (NZ) also made a stronger foray into the residential market, with its residential loan portfolio increasing to $172.9m versus $102.4m in the prior year. Its corporate exposure jumped from $278.6m to $531.4m.
| An NZNewsWire release | April 03, 2017 |||
Palace of the Alhambra, Spain
By: Charles Nathaniel Worsley (1862-1923)
From the collection of Sir Heaton Rhodes
Oil on canvas - 118cm x 162cm
Valued $12,000 - $18,000
Offers invited over $9,000
Contact: Henry Newrick – (+64 ) 27 471 2242
Mount Egmont with Lake
By: John Philemon Backhouse (1845-1908)
Oil on Sea Shell - 13cm x 14cm
Valued $2,000-$3,000
Offers invited over $1,500
Contact: Henry Newrick – (+64 ) 27 471 2242
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