Regulatory Update – July 2013 Industry Impact High Medium Low Current NZBA Priorities FATCA Consumer Law AML/CFT Financial Markets Conduct Bill/Regulations Basel III Proposals and consultation Legislative development Implementation AML/CTF Financial Markets Conduct Bill FATCA Consumer Credit & Financial Services Reform Bill Consumer Law Reform Basel III Covered Bonds Companies and Limited Partnerships Bill Macro-prudential policy Financial Reporting Bill Privacy Act Review Initial scoping/discussions Financial Advisers Act review Financial Markets Conduct Regulations RBNZ review of payments system Land Transfer Bill Class Actions Bill Micro-credit proposals Retirement Policy Review Proposed OCR setting and RBNZ transparency Bill Guidance Note: DIMS Guidance Note: Personalised Advice

Industry Impact High Medium Low NZBA Priorities FATCA Consumer Law AML/CFT Financial Markets Conduct Bill/Regulations Basel III OBR The ‘Industry Impact’ measure indicates the significance of the impact that the proposals would have on industry, including direct costs and other impacts. The ‘NZBA Priorities’ lists the priority work areas for NZBA as determined by the NZBA Council. Regulatory Update - Key The location of the item in the diagram indicates how far progressed the policy is. At the outer rim it indicates initial scoping. In the centre it indicates that it is being implemented. Relevant agencies MBIEMinistry of Business, Innovation and Employment RBNZReserve Bank of New Zealand IRDInland Revenue Department MoJMinistry of Justice FMAFinancial Markets Authority LINZLand Information New Zealand MSDMinistry of Social Development

ProjectPriorityCommentNext steps Lead agency (Portfolio) Milestones Basel IIIHigh NZBA is preparing to seek an exemption from the Securities Act for changes required by Basel III implementation relating to conversion of capital on non-viability. We are also seeking clarification from IRD on tax outcomes of issuing tier 2 capital, focusing on conversion. Continue to engage on implementation issues, including convertibility. RBNZ/IRD(Revenu e)/FMA Conservation buffer and countercyclical buffer – 1 January 2014 Macro- Prudential Policy Developme nt High RBNZ recently consulted on proposed additional tools. The industry has outlined its concerns about the use of the tools. RBNZ and is now consulting on a framework for imposing restrictions on high-LVR residential mortgage lending. Consultation on changes to the Banking Supervision Handbook. RBNZ 3 July - Consultation closes on changes to Banking Supervision Handbook for high-LVR lending FATCAHigh Currently, NZBA is lobbying government to ensure banks can comply with data collection obligations by 1 January NZBA is also contributing to work on domestic implementation. Submit on the content of proposed legislation and guidance. IRD (Revenue) 1 January 2014 – data collection obligations in force. Phased introduction of other FATCA requirements Consumer Credit and Financial Services Review Bill HighThe Bill has been introduced. The industry has significant concerns about the Bill which we will raise through the Select Committee process and engages on with officials and stakeholders. Submission to Select Committee. Engagement on Responsible Lending Code. MBIE (Commerce)Bill expected to have first reading in July/August

ProjectPriorityCommentNext steps Lead agency (Portfolio) Milestones Consumer Law Reform Bill High The Consumer Law Reform Bill comprehensively amends consumer law. Concerns remain about the unfair contract terms provisions. Bank review of contracts for unfair contract terms during transition period MBIE (Commerce) Bill is expected to pass Q Financial Markets Conduct Bill High The Bill is expected to be enacted in this year MBIE consulted on the content of regulations in early Cabinet policy approvals for the majority of the regulations were obtained in June An exposure draft is expected to be released later in the year. The FMC Bill is expected to be enacted shortly. Work is still underway in finalising the regulations. MBIE (Commerce) Bill expected to pass Q Exposure draft of regulations expected Oct Final regulations expected March 2014 FMC Act come into force April 2014 Anti-Money Laundering and Countering Financing of Terrorism Act 2009 Medium The regime came into force on 30 June. Supervisors are continuing to provide guidance and processing applications for exemptions under the regime. The Minster of Justice has announced further changes to the regime around reporting and the criminal offences for money laundering. Legislation to implement new changes. MoJ (Justice)/RB NZ Financial Reporting Bill MediumNZBA and member banks are working with NZICA on standards for these entities that would satisfy bank requirements. The Select Committee reported back on the Bill on 22 May. MBIE (Commerce) Expected passage mid/late 2013

ProjectPriorityCommentNext steps Lead agency (Portfolio) Milestones RBNZ Payments Review Medium RBNZ has undertaken a review of its oversight powers for payments and settlement systems and concluded that its current powers are insufficient and need to be strengthened. Submissions on the proposed changes closed in early May. RBNZ Class Actions Legislation Medium Government intends to initiate policy work on legislation to allow multiple litigants to start a single proceedings against one or more defendants relating to claims from the same or related circumstances. Report to Minister of Justice expected late 2013 MOJ (Justice) Micro- financing /micro-credit Medium The Minister of Social Development has announced that the Government in consultation with banks and NGOs intends to develop a micro- lending/credit regime. MBIE is leading the work on scoping out options and gaining feedback on the potential design of the scheme. Development of proposals, providing feedback to MBIE MBIE (Commerce)/M SD (Social Development)/ Treasury Guidance Note: Personalised advice Medium The note will focus on: how advisers document and demonstrate suitability of advice, and the provision of more limited advice compared with full personalised advice. Consultation expected mid-July FMA Guidance Note: Discretionary Investment Managemen t Schemes MediumThe note will focus on how FMA intends to apply the law, including: what DIMS are adviser conduct expectations, and best practice. Consultation expected mid-July FMA

ProjectPriorityCommentNext steps Lead agency (Portfolio) Milestones Privacy Act Review Low The Government is currently reviewing the Privacy Act in response to the Law Commission’s report. Officials expect to brief the Minister on additional changes in July/August. MoJ (Justice) Commerce (Cartels and Other Matters) Amendment Bill Low The Bill replaces the current ‘price fixing’ provisions in the Commerce Act with new sections which deal with cartels. The Select Committee reported back on the Bill on 14 May. MBIE (Commerce) Companies and Limited Partnerships Amendment Bill Low This Bill incorporates a number of proposed reforms, including changes to the Companies Act and Limited Partnerships Act. In particular, it criminalises serious breaches of some directors’ duties and requires companies to have a NZ/Australian resident director. The Bill also clarifies the use of electronic documentation. MBIE (Commerce) Expected passage mid/late-2013 Financial Advisers Act Review Low The Government is required to review the Act by the end of MBIE has had initial conversations with stakeholders on the scope of the review, and has provided an initial briefing to the Minister. Scope and timeline for the review announced. MBIE (Commerce) Retirement Income Policy Review LowWork is currently underway on the 2013 review of retirement income policy. Submissions on the Terms of Reference closed May. Commission for Financial Literacy and Retirement Income Final report expected Sept/Oct 2013

ProjectPriorityCommentNext steps Lead agency (Portfolio) Milestones OCR rate setting and RBNZ transparenc y Low The proposed Private Members Bill from the Green Party will make the Reserve Bank Board responsible for setting the OCR and will require the Board to publish its minutes within a fortnight of meetings. The Green Party has asked for public feedback before the Bill is placed in the Ballot. Developing feedback Green Party Land Transfer Bill LowLINZ is currently reviewing the Land Transfer Act 1952, in response to Law Commission Report 116. Submissions on an exposure draft closed in May. Summary of submissions is expected in mid- July. Report back to the Minister on Bill Aug/Sept LINZ (Land Information)