COVID-19: financial services are essential services

Last updated: 10.00am on Friday 27 March 2020

On Wednesday 25 March, the Financial Markets Authority (FMA) published a more detailed list of essential financial services, which has been confirmed by the Council of Financial Regulators (CoFR) after consulting with the Government.

This follows on from the FMA’s earlier updates on COVID-19 essential services available here and here.

These provide useful guidance as to how the move to Level 4 of the COVID-19 alert system from 11.59 pm on Wednesday 25 March 2020, applies to financial services. The Government’s requirements can be found here.

What do they cover?

Non-essential businesses must now close their premises. They may still work – as long as this is from home, and within the isolation requirements.

Essential businesses may remain open during the Alert 4 period. Where is it is possible to deliver some essential services entirely with staff working remotely from home, they are expected to do so. However, if essential workers are required to leave home to work, then their business must:

  • Minimise personal interactions, amongst staff and with customers and
  • Ensure all appropriate health, hygiene and safety measures are in place.

As at 27 March, Government’s list of essential businesses includes “financial services” which are set out as:

  • Any entity that operates consumer and business financial services, financial services infrastructure including banking services, a stock exchange, broking services, payment and settlement systems, funds management including KiwiSaver, insurance services, financial advice, and support services such as administrators, supervisors and custodians.

The Government’s list also states that any critical suppliers in the supply chain of essential businesses can continue to operate from their premises, but only to provide services to business providing essential services, and subject to the restrictions outlined above.

The lead agencies named for the financial services sector are named as the Reserve Bank of New Zealand, and the FMA.

On Monday 23 March, the FMA advised that it expected essential services to include all consumer and business financial services and financial services infrastructure.

On Tuesday 24 March, in a further release, the FMA said that financial advice “clearly remains an important service” despite not being an essential service covered by the Government’s definition of workplaces/offices that need to remain open.  The FMA expects most advisers should be able to work from home and can continue to provide support to clients. However, we anticipate further clarification on this point from the FMA in light of the Government’s updated list of essential financial services now including “financial advice”.

As of Wednesday 25 March, the CoFR-confirmed list of financial services deemed essential financial services consists of the following:

  • banking services, non-bank deposit takers (NBDTs), credit unions (which applies to all registered Banks and NBDTs listed on the Register of Registered banks in New Zealand and Register of licensed NBDTs);
  • insurance services (which applies to all licensed insurers listed in the Register of licensed insurers in New Zealand);
  • NZX;
  • broking services;
  • payment and settlement system providers;
  • fund managers and investment management;
  • KiwiSaver providers;
  • administration support services,
  • licensed supervisors;
  • custodians;
  • credit rating services;
  • finance companies; and
  • registry services.

The list also identifies certain functions which are likely to form a critical part of the supply chain for insurers, and the essential functions provided by each category of financial services to provide guidance on how they should continue to operate during the Alert 4 period.

What next?

The period for which the lockdown will apply is not fixed. Originally, announcements referred to 4 weeks, but more recently reference has been made to several weeks indicating it may run longer if that is required.

Other FMA/MBIE steps

We are expecting clarification from the Ministry of Commerce and FMA as to whether the “go-live” date for the new financial advisers’ regime under the FSLAA will be postponed from 29 June 2020, in the next day or so. Various parties have made submissions to that effect, but as at today, no deferral has been formally made. We expect at least a six-month deferral is likely – but that financial services business will need all of that time to be ready.

The submission period for the Conduct of Financial Institutions Bill has been extended to 28 April, but at this stage, it is still scheduled to proceed within this Parliament. It remains to be seen if that remains.

MinterEllisonRuddWatts Level 4:

At MinterEllisonRuddWatts, we moved ahead of the Government’s designation of Level 4, to play our part in reducing the risks for our clients, our people and the community. We are pleased that our people, systems and processes have responded well While our physical offices are closed, we are fully open for business and remain available to support you and your business throughout this period.

If you have any questions, please contact one of our experts.

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