People can expect fairer treatment from banks, insurers and other financial service providers as the Government moves to introduce a new regime to regulate financial conduct, Commerce and Consumer Affairs Minister Kris Faafoi says.
“Under this new regime we are aiming to ban things like target-based sales incentives, which put profits ahead of people, as has been identified in recent reviews.
“Those reviews by the Reserve Bank of New Zealand and the Financial Markets Authority (FMA) have also highlighted other problems in the banking and insurance sectors, which include weak systems for managing conduct risks and ensuring good conduct is a priority in their business.
“We will soon introduce new legislation to Parliament which will require banks, insurers and other financial service providers to put systems in place to make sure they treat their customers fairly,” Mr Faafoi says.
The measures the Government is introducing include:
- a new conduct licensing system for banks, insurers and non-bank deposit takers such as credit unions.
- the new regime requiring these entities to meet high standards of customer treatment.
- a ban on incentives which are based on meeting sales targets.
“Incentives such as overseas trips or bonuses for selling a certain amount of insurance policies can lead to sales staff pressuring customers into buying unsuitable products, like policies they can never claim on. Removing these types of incentives will provide better protections for consumers from misconduct.
“New Zealanders need to be confident that the financial advice, products and services they are buying will be appropriate to their circumstances and meet their needs,” Mr Faafoi says.
The new regime will be backed by strong enforcement tools, including giving the FMA the ability to direct licensed institutions to change behaviour, improve their systems and processes, as well as suspend or vary the conditions of a licence.
Financial institutions will face strong financial penalties for breaching their obligations under the regime.
“By taking action to improve conduct, we’re putting the consumer at the centre and helping banks and insurers to restore confidence in their industry. We all benefit from a well-functioning financial sector that’s focussed on the interests and needs of customers,” Mr Faafoi says.
FMA welcomes Government announcement on expanded remit
The Financial Markets Authority today welcomed the Government’s announcement that it would introduce legislation to create an oversight regime for regulating conduct in the banking and insurance sectors.
FMA chief executive Rob Everett says the FMA and Reserve Bank had highlighted gaps in the regulation of banks and insurance in their joint thematic reports on conduct and culture in both sectors.
“The Government has said today it intends to close these gaps and give us the mandate to implement and enforce conduct obligations across both sectors.
“We look forward to working with industry to implement any changes passed by Parliament to ensure banks and insurance companies serve the needs of their customers,” he says.