Jess
Kia ora, and welcome to Five Minutes with the FMA, a podcast by New Zealand's Financial Markets Authority. My name is Jess. I'm from the Communications and Delivery team here at the FMA. Today, we're going to be talking about the Financial Conduct Report. This report outlines the FMA's regulatory priorities for the next 12 months and the rationale behind those priorities. Here to talk to us today about the report is FMA Chief Executive Samantha Barris. Welcome, Sam. Thank you for joining me today.
Sam
Absolute pleasure, Jess. Thank you for having me here.
Jess
Let's start off by talking about why the FMA has produced the Financial Conduct Report, otherwise known as the FCR.
Sam
So this is our second FCR. And the reason that we produced it and we did our first one last year is because for me, a golden rule of regulation is to be as predictable as possible. The more the industry and the firms you regulate know what we're going to be interested in and why, the better the outcomes will be and the better prepared everyone will be. And the FCR is the vehicle for us to do that. It provides a look forward for the year coming up on what it is the industry can expect from the FMA and how to prepare for the kind of engagement that we will be wanting to have with them.
Jess
And talking about looking back, could you tell me what we've achieved over the past 12 months?
Sam
It's been a great 12 months. The delivery against the priorities that we set out in the first financial conduct report has been great. I mean, just some highlights. We published the work that we did into access to financial advice, but it wasn't just a document that we produced. We started a whole engagement and dialogue. with the industry and with consumers over how we can enable a better access for kiwis to financial advice. The second area was the successful sandbox, looking at providing opportunities for fintechs and other firms to innovate in a safe environment where we can look at what is enabled by our regulatory framework that we have and where we need to provide a bit more help. And in the last few months of the year, we introduced the concept of scaling up the sandbox through an on-ramp license. So there are two things there.
Jess
So looking forward to this year, what are some of the key focus areas?
Sam
So we're operating in an even more uncertain environment geopolitically with some question marks over, economic times that people are living in. And what we can look forward to in this coming year is, as you know, as with last year, a particular kind of sector by sector approach. So if you're a financial advisor, you'll be able to pick up financial advice chapter and look at what we'll be focusing on for there. But also, I think importantly, there are some cross-sector themes that we will continue to work on. They emerge from the work that we did last year. So there are four cross-sector themes that we are looking at and set out in the FCR. The first is conflicts that may arise in certain types of remuneration structures. And these will be conflicts that cut across customers getting the outcomes that they are expecting from the products. And that will be particularly with financial advice as well as credit. We'll also be looking at product design for new and redesigned products. What is the intended outcome for the customers that the firms have in mind and are those experienced in the ways that customers would expect them to be experienced? And following on from the product design is taking the work that we did last year on complaints, where we were looking at how do customers, how well do customers know how to complain this year. We're going to be lifting up a notch and looking at how firms are using the rich source of information that is presented through complaints data in their product design, in their service design, in the lifting up of the quality of the experience for customers. The 4th area is we will be looking at fraud, the prevention of fraud and detection as well, and we'll be particularly focused on insurance fraud, mortgage fraud, and a worrying increase in fraud around withdrawal of KiwiSaver for first-time house buyers.
Jess
That's great. And I know we're focused on innovation, in particular, the emerging trend of artificial intelligence. Could you talk a little more on that?
Sam
It's really important for the FMA that we support and foster a future-focused financial sector, that we are supporting and looking at the ways in which we can work with the regulatory system that we're in. to make sure that firms can innovate and that New Zealand, New Zealanders can get the benefit of the new innovations. I was talking about financial advice just before. The role of AI in the provision of financial advice is a real area of potential opportunity for customers to be able to, New Zealanders to be able to access financial advice. And so we will be really leaning into the support that we provide for innovation and encouraging firms to look at ways that they can innovate. And we'll be open ourselves to the way that we need to change the way we regulate and the kind of support that we need to provide in the broader ecosystem around innovation and fintech and technology, as I said, to deliver the outcome that New Zealand is, that we are supporting New Zealand's move to a really future-focused financial sector.
Jess
Absolutely, yeah, really important. And in addition to the regulatory priorities, is there anything else that industry should be aware of?
Sam
We will always be alive to the emerging risk, any emerging risks of harm and responding, being in a position to respond to that promptly will be a key focus for us and what the industry will see. is that we're perhaps using a broader range of tools in the way that we do that to enable us to move quickly?
Jess
Yeah. So the financial conduct report has a section on credit. Can you talk about what's happening there?
Sam
The regulation of credit will be moving from the 1st of July from the Commerce Commission to the FMA. We will be in a position to bring together the great experience that our Commerce Commission colleagues have, who will be joining us here at the FMA, with the broader toolkit that the FMA has to be able to expand the ways in which we can regulate credit, the provision of credit, and particularly some of the focus on vulnerable customers.
Jess
And so what should industry do with the report?
Sam
We'll be doing a lot of engagement around the financial conduct report. That's we're an engagement-led regulator, that's really important to us. We want to give the industry every opportunity to be able to understand what we're going to be focusing on, because that way we can work together to deliver some really great outcomes in this coming year. Awesome.
Jess
Thank you so much for your time today, Sam.
Sam
Pleasure.
Jess
And thank you so much for listening. If you'd like to find out more about the financial conduct report, you can head to our website. There will be some videos that will have the key findings for each sector. Just head to www.fma.govt.nz and I'll see you next time.
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