The infamous idea of imposing taxes on deposits became the talk of town when Cyprus scrambled to raise some money a few weeks back. Although it was one of the Troika’s conditions for the government to be granted its much-needed bailout, the proposal faced a lot of criticism and resistance.
Interestingly enough, some policymakers from New Zealand seem to think otherwise.
You should know that the RBNZ has been hard at work in studying the Open Bank Resolution (OBR) policy to be implemented in New Zealand. Reportedly at its final stages now, the program–which will determine how institutions will handle insolvency–will require depositors to shoulder losses in their savings in order to fund their bank’s bailout.
While certainly far from the debt-laden conditions of Europe, New Zealand has been increasingly vigilant in safeguarding its own financial system.
Just recently, the Financial Markets Authority and the registrar of Financial Services Providers (FSP), delivered a stern memorandum to all New Zealand firms registered with the FSP saying that they MUST have a physical office in the country. Any firm who fails to comply with the mandate will have their registration terminated.
What does this mean for New Zealand‘s forex industry?
Currently, New Zealand is considered as a safe haven for forex brokers. New Zealand boasts a relatively strong economy, free from the financial turmoil in the West. In addition, the country is geographically near the Asia-Pacific region and its close proximity makes it easier for brokers to access the potentially huge market of forex traders there.
And finally, and probably most important of all, financial regulation in the country is less stringent than in Western nations, which makes it easier for brokers to do business. But if the new mandate gets implemented, New Zealand may lose this broker perception of being a safe haven, potentially causing forex brokers to take their operations elsewhere.
Of course, stricter regulation also has a few positive effects. For instance, clients can be rest-assured that, apart from the country’s stable economy and banking system, authorities in New Zealand are also doing their jobs to ensure that the financial sector stays stable.
At the end of the day, whether the new regulation will do more harm than good remains to be seen. For now, we’ll just have to wait and see!