Reserve Bank of New Zealand consults on recommending designation of the High Value Clearing System under the Financial Market Infrastructure Act

The Reserve Bank of New Zealand has opened a consultation on a proposal to recommend that the Minister of Finance designate the High Value Clearing System (HVCS) under the Financial Market Infrastructure Act 2021, bringing the system into the Act’s regulatory perimeter and providing it with greater legal protections. HVCS is a pure payment system operated by Payments NZ and has not previously been regulated. The Reserve Bank highlighted its systemic importance for large-value payments, such as house settlements, noting that more than NZD 420bn of transactions are cleared through HVCS each month and that the system cannot be easily substituted. If designated, HVCS would need to comply with the Act and related standards, and the Reserve Bank would be able to scrutinise its governance, access arrangements and crisis management, with powers intended to help avoid significant damage to the financial system if issues arise. Submissions are open until 30 September. After considering feedback, the Reserve Bank will decide whether to proceed with a recommendation to the Minister, who will make the final decision on designation.