Clear requirements for ensuring customers are treated fairly by banks, insurers and other financial service providers are included in new financial conduct legislation that passed its first reading today.
“The recent reviews, by the Financial Markets Authority (FMA) and Reserve Bank of New Zealand, into the conduct of banks and insurers found factors such as target-based sales incentives were leading to behaviour that put profit ahead of people,” Commerce and Consumer Affairs Minister Kris Faafoi said.
“The Financial Markets (Conduct of Institutions) Amendment Bill delivers on a number of changes to require banks, insurers and other financial service providers to have the right systems in place for ensuring they treat their customers fairly.
“Last year I announced a ban on incentives that are based on meeting sales targets, along with a new conduct licensing system for banks, insurers and non-bank deposit takers, such as credit unions.
“These measures will be implemented through obligations for licensed entities to have in place and comply with programmes outlining the standards of fair conduct their business operations will need to meet.
“The conduct programmes will also apply down the chain to intermediaries that licensed entities use to distribute their products and services,” Kris Faafoi said.
To support the Bill, the FMA will have a wide range of tools to require financial institutions to make changes to their business.
“Since the conduct and culture reviews, the Government has moved swiftly to see that the industry addresses conduct and culture issues.
“The Government also recently announced changes to make insurance contracts fairer and more transparent for consumers. These changes will complement the new conduct regime by ensuring customers understand their policies and are treated fairly in all their dealings with insurers,” Kris Faafoi said.