Financial Regulation Changes New Zealand’s 2025
New Zealand’s financial services sector is getting a major overhaul in 2025. The government is streamlining regulations by repealing parts of the Conduct of Financial Institutions Act and introducing new licensing frameworks under the Financial Markets Conduct Act 2013 (FMC Act). These reforms aim to cut costs for businesses, protect consumers, and improve access to finance, especially for vulnerable borrowers. This post breaks down the changes, guides financial institutions on compliance, and explains how these reforms affect New Zealanders.
Why These Reforms Are Happening
The financial services sector drives New Zealand’s economy. Complex rules, like those in the Conduct of Financial Institutions (CoFI) Act, increased costs for businesses and limited loan access for consumers. The government wants to simplify regulations, reduce compliance burdens, and ensure fair treatment for all, especially vulnerable groups like low-income borrowers or those with disabilities.
Key Changes in 2025
The reforms focus on simplifying rules and improving outcomes. Here are the main updates:
| Change | Details | Impact |
|---|---|---|
| Partial Repeal of CoFI Act | Simplifies obligations for banks, insurers, and non-bank deposit takers. | Reduces compliance costs for financial institutions. |
| New Licensing Framework | One license under FMC Act for all market services, overseen by FMA. | Streamlines processes, saves time for businesses. |
| CCCFA Oversight Shift | FMA takes over from Commerce Commission for credit contracts. | Ensures consistent regulation across financial services. |
| CCCFA Amendments | Removes personal liability for lenders’ directors and senior managers. | Encourages flexible lending, benefits vulnerable borrowers. |
| Risk-Based Penalties | Penalties apply only if breaches cause genuine financial harm. | Promotes fair lending without fear of harsh penalties. |
Repeal of CoFI Act
The Financial Markets (Conduct of Institutions) Amendment Act 2022, passed on 29 June 2022, set strict rules for financial institutions. It required banks, insurers, and non-bank deposit takers to get licenses for their conduct toward consumers. By 31 March 2025, parts of this act are repealed to reduce complexity. The government aims to keep fair conduct standards but make compliance easier, as noted by Minister Andrew Bayly (MinterEllison).
New Licensing Framework
The FMC Act now requires one license for all market services, monitored by the FMA. Licensing applications opened on 25 July 2023, with full compliance due by 31 March 2025. Supporting regulations, set in June 2023, ban sales incentives based on volume targets and outline licensing fees (MBIE).
CCCFA Reforms
The Credit Contracts and Consumer Finance Act (CCCFA) had strict rules that made lenders overly cautious, limiting loan access for vulnerable borrowers. Key changes include:
- Oversight Shift: The Fස
FMA takes over from the Commerce Commission, ensuring consistent regulation.
- No Personal Liability: Directors and senior managers no longer face personal penalties for minor breaches, encouraging flexible lending (Bell Gully).
- Risk-Based Penalties: Penalties apply only for breaches causing real harm, reducing lender caution (KPMG).
Impact on Financial Institutions
- Simpler Licensing: One license reduces paperwork. Financial institutions must apply through the FMA by 31 March 2025.
- Fair Conduct Programmes: Institutions must create programmes to ensure fair treatment, including staff training and monitoring.
- Lower Costs: Streamlined rules cut compliance costs, allowing focus on business operations.
- Compliance Tips: Review FMA guidelines, update conduct programmes, and train staff to meet new standards.
Impact on Consumers and Vulnerable Borrowers
The CCCFA’s strict rules pushed some borrowers toward high-cost, unregulated lenders. The 2025 reforms aim to fix this:
- Easier Loan Access: Flexible lending rules help vulnerable borrowers get loans from licensed providers.
- Fair Treatment: Fair conduct programmes ensure banks and insurers prioritize consumer needs.
- Protection from Harm: Risk-based penalties mean lenders focus on fair outcomes, not avoiding minor errors.
For example, exemptions for loans like those for insulation or heat pumps reduce costs, making finance more accessible (MBIE).
How to Navigate the New Rules
- For Financial Institutions:
- Apply for the new FMC Act license via the FMA website (fma.govt.nz).
- Develop a fair conduct programme with clear policies for consumer treatment.
- Train staff on new standards to avoid penalties.
- Check MBIE’s consultation outcomes for final rules (MBIE).
- For Consumers:
- Verify lenders are FMA-licensed for fair treatment.
- Compare loan options to avoid high-cost, unregulated lenders.
- Seek financial advice from licensed providers for clarity.
Why This Matters
These reforms create a fairer financial system. Businesses save time and money with simpler rules. Consumers, especially vulnerable borrowers, get better access to loans and fairer treatment. The shift to FMA oversight ensures consistent standards across the financial sector.
Final Thoughts
New Zealand’s 2025 financial regulation changes make life easier for businesses and consumers. They reduce red tape, protect vulnerable borrowers, and promote fair lending. Stay informed through MBIE and FMA updates to make the most of these reforms.