Conduct of financial institutions regime

Financial institutions conduct regime

The Financial Markets (Conduct of Institutions) Amendment Act 2022 was passed into law on 29 June 2022. The legislation introduces a new regime regulating the conduct of financial institutions that will come fully into force on 31 March 2025.

Once it comes into force, the new regime will:

• Require banks, insurers and non-bank deposit takers (together, financial institutions) to be licensed in respect of their general conduct towards consumers. The licensing regime will be monitored and enforced by the Financial Markets Authority (FMA).
• Require financial institutions to establish, implement and maintain effective fair conduct programmes throughout their businesses that ensure they meet the requirement to treat consumers fairly.
• Require financial institutions to comply with their fair conduct programme.
• Require financial institutions and intermediaries involved in the chain of distribution to comply with regulations that regulate incentives. These regulations will be able to prohibit sales incentives based on volume or value targets, e.g. soft commissions such as overseas trips, bonuses for selling a certain number of financial products, or leader boards.

Supporting regulations

In June 2023, regulations were made to support the new regime. These include regulations prohibiting financial institutions and their intermediaries from offering sales incentives based on volume or value targets, regulations setting the licensing fee for financial institutions, and other details.

More details about these regulations, and consultation carried out on them, are available at the following pages:

Sales incentives and other regulations under the new conduct regime

Financial institution licensing fees under the new conduct regime

2024 Financial Services Reforms

In January 2024, the Minister of Commerce and Consumer Affairs announced plans to reform aspects of New Zealand’s financial services regulation. This includes proposals to review the requirements on financial institutions under the Financial Markets (Conduct of Institutions) Amendment Act 2022 and to review conduct licensing under the Financial Markets Conduct Act. This review is taking place alongside a review of the Credit Contracts and Consumer Finance Act 2003.

Public consultation closed on 19 June 2024, and Cabinet has agreed to a set of proposals. These can be found here:

2024 Financial Services Reforms

Next steps

The FMA is working with financial institutions to ensure they are prepared for the new regime, with licensing applications opening on 25 July 2023.

The Government will be consulting on options to streamline requirements for the conduct of financial institutions, including reviewing conduct licences, in mid-2024.

The regime will come into force on 31 March 2025.

Development of the regime

The Government consulted publicly in 2021 and 2022 on various issues to inform the development of the conduct of financial institutions regime.

You can find these discussion documents here:

Conduct of financial institutions treatment of intermediaries

Conduct of financial institutions regulations

Sales incentives and other regulations under the new conduct regime

Financial institution licensing fees under the new conduct regime

Feedback or questions welcome

We welcome feedback or questions at any time about this work. If you would like to contact us, you can email:

financialconduct@mbie.govt.nz

Related documents and information

Bank conduct and culture review on the FMA website(external link)

Life insurer conduct and culture on the FMA website(external link)