Hon Kris Faafoi
25 September 2019
Customers 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 said today.
“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,” Kris Faafoi said.
“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,” Mr Faafoi said.
“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,” he said.
The measures the Government is introducing include:
“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,” Minister Faafoi said.
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 said.
Notes to Editors:
The new financial conduct regime will:
More information on the review is available at https://www.mbie.govt.nz/business-and-employment/business/financial-markets-regulation/conduct-of-financial-institutions-review