On 17 August 2023 at the Financial Services Council New Zealand conference National Party leader Christopher Luxon announced three significant policies relating to investments, insurance and lending. These will be enacted if National forms a government after October’s election (subject to coalition partner agreement, which is likely). The policies are:
- Allowing KiwiSaver investments to be invested via more than one KiwiSaver provider (the details of how that will work are to be confirmed later).
- Revoking most recent reforms of consumer credit law under the Credit Contracts and Consumer Finance Act (so reducing the evidence lenders need to obtain to confirm that borrowers will be able to repay their loans). This will make it easier to lend in some cases but lenders would still have significant responsible lending obligations.
- Repealing the Conduct of Financial Institutions (CoFI) law reforms that will regulate bank and insurer conduct (fully in force from 31 March 2025).
National’s commerce and consumer affairs spokesperson Andrew Bayly indicated that other regulatory measures are also in their sights including AML obligations.
Repealing CoFI law would not only have significant impacts on the financial institutions that have already completed significant work on implementation. This would also:
- Revoke regulations that will restrict (from 31 March 2025) the types of incentives that can be paid by financial advice providers (FAPs) and other intermediaries to some of their personnel in relation to advice and services provided to retail clients.
- Remove controls that financial institutions would otherwise have to impose (also from 31 March 2025) on intermediaries (including FAPs) who distribute their products.
- Likely impact on FMA’s ongoing programme to significantly grow its staff numbers to undertake licensing, supervision and enforcement in relation to CoFI law.
Even if CoFI law is revoked it’s likely that some financial institutions will still introduce some CoFI-related changes. And, while CoFI will undoubtedly improve outcomes for some consumers, there has always been a risk that the high costs of implementation (and indirect costs including reducing innovation and raising barriers to entry) could outweigh the benefits.