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July 13, 2017

The RBNZ and the Ministry of Business, Innovation, and Employment launched a public consultation on the implications of foreign margin requirements for over-the-counter (OTC) derivatives in New Zealand. The consultation seeks views on potential targeted legislative changes to enable the affected New Zealand entities to comply with these rules. The consultation also seeks stakeholder views on the scope of issues identified and the adequacy and effect of the amendments proposed.

Although New Zealand has no margin requirements in OTC derivatives, several banks registered to operate in New Zealand will likely have to comply with the margin rules being implemented in foreign jurisdictions. Margin is a collateral exchanged by the derivative market participants to protect against the risk posed by credit exposures and to reduce the risks of financial market contagion if a derivative contract counterparty defaults. The prompt and free availability of margin provided by New Zealand banks could be impeded, due to some features in New Zealand laws covering statutory management and creditor priorities, potentially impairing banks’ access to derivative products and markets they use for funding and hedging. The soundness, efficiency, and global integration of the country's financial sector could be protected by addressing the issue. The consultation identifies specific impediments to compliance in New Zealand law and proposes a number of targeted legislative amendments to address them. 

 

Related Link: Consultation Document (PDF)

Comment Due Date: August 24, 2017

Keywords: Asia Pacific, New Zealand, RBNZ, OTC Derivatives, Securities, Banking, Margin Requirements

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