New financial conduct regime will ensure customers are treated fairly

The Financial Markets (Conduct of Institutions) Amendment Bill, which has now passed its third reading, requires banks, insurers and non-bank deposit takers to have the right systems in place for ensuring they treat their customers fairly.

The changes follow reviews by the Reserve Bank of New Zealand - Te Pūtea Matua and Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko which identified that banks and insurers in New Zealand lack focus on good customer outcomes, and have insufficient systems and controls to identify, manage and remedy conduct issues.

Issues have included products not being designed with good customer outcomes in mind, customers being pressured into buying unsuitable products due to sales pressures, and inadequate systems for handling complaints and claims. The new regime will work to prevent this type of conduct in the future.

Measures in the new regime include:

• a requirement for banks, insurers and non-bank deposit takers to be licensed by the FMA in relation to their general conduct
• a requirement for licensed institutions to have and maintain effective policies, processes, systems and controls throughout their businesses that ensure they are treating consumers fairly
• an ability to prohibit or regulate certain sales incentives through regulations. This will include regulations to ban sales incentives based on volume or value targets like bonuses for selling a certain number of financial products.

The FMA will work with financial institutions to ensure they are prepared for the new regime, and licensing applications are expected to open in mid-2023. The Ministry of Business, Innovation and Employment will also develop supporting regulations. The regime is expected to come fully into force in early 2025.

Read more about the new financial conduct regime:

Conduct of financial institutions regime

Read the Minister’s press release:

Govt passes law to protect consumers in banking and insurance sector(external link) — beehive.govt.nz