Commerce and Consumer Affairs Minister Kris Faafoi said banks must lift their game to ensure the rights of customers are protected.
A review of bank conduct by the Financial Markets Authority (FMA) and Reserve Bank of New Zealand (RBNZ) identifies instances of poor conduct by bank staff and weaknesses in bank processes to manage them.
“We are not happy to hear that there are problems, but by identifying them we now have an opportunity to fix them. New Zealand customers should get fair treatment and their needs must be put first,” Faafoi said.
Finance Minister Grant Robertson said that dealing with the problems identified in the report was critical to ensure New Zealanders have confidence in their banking system.
“Any weaknesses in how banks manage the way they behave is a concern. This report highlights why we must remain vigilant to the risks that Australian customers are facing.”
Banks need to provide a service that’s acceptable by New Zealanders and my hope is they will do this by placing customers at the heart of their decision making,” said Grant Robertson.
Fairfoi said a programme of work is already underway to improve regulation of New Zealand’s financial system and to prioritise customer interests.
This includes the Financial Services Legislation Amendment Bill to strengthen regulation of financial advice, changes to the Credit Contracts and Consumer Finance Act to target irresponsible lending, and a review of insurance contract law.
In their joint statement the FMA and RBNZ said their review was into the conduct and culture of 11 New Zealand banks.
The regulators identified significant weaknesses in the governance and management of conduct risks. These weaknesses resulted in a number of issues that require remediation.
They said banks’ lack of proactivity in identifying and remediating conduct issues and risks means vulnerabilities remain. The FMA and RBNZ conclude that the overall standard of banks’ approaches to identifying, managing and dealing with conduct risk needs to improve markedly.
They found a small number of issues related to poor conduct by bank staff which the banks are following up.
However, based on their findings, the FMA and RBNZ do not consider that widespread misconduct or poor culture issues currently exist across banks in New Zealand.
All 11 banks reviewed will receive individual feedback. Each bank must report back and provide plans to address regulators’ feedback by the end of March 2019.
Key areas have been identified for improvement, including:
- Greater board ownership and accountability – including being able to properly measure and report on conduct and culture risks and issues.
- Prioritising the identification of issues and accelerating remediation.
- Prioritising investment in systems and frameworks to strengthen processes and controls.
- Strengthening staff reporting channels, including whistleblower processes for conduct and culture issues.
- Removing all incentives linked to sales measures and revising sales incentive structures for frontline salespeople and through all layers of management.