Banks have been issued a warning to change their culture in a landmark report into banking conduct.
The report by the Financial Markets Authority and the Reserve Bank does not consider there to be widespread misconduct or poor culture issues across NZ banks, as has been discovered by a Royal Commission in Australia.
But it’s identified a number of problems with the management of “conduct risks”. That leaves banks “vulnerable to misconduct”.
The report calls for banks to remove all sales incentives for staff – such as selling banking products to customers.
About 431,000 customers have “recently” been affected by banking issues such as being incorrectly charged fees or interest, at a total cost of $23.9 million.
Other issues include incorrect interest rates being applied to credit cards, fee waivers not applied consistently and inappropriate offers of credit sent to customers.
A small number of cases of poor conduct by banking staff – such as inappropriate lending, fees outweighing benefits and manipulation of customer and branch records were also identified.
Of a survey of 2000 banking customers, 15 per cent said the bank had pressured them in to buying unwanted financial products.
And whistle-blower policies are not effective in encouraging staff to speak up about day-to-day issues.
All 11 banks reviewed will receive individual feedback.
A number of recommendations have been made, including speeding up remediation and investing in new systems.
Banks have until March next year to report back with their changes.
The Government is also being urged to tighten up banking regulations. The report finds current settings doesn’t provide enough scope for banks to be held to account for their conduct.
- Banks warned to change their culture
- Government urged to tighten up banking regulations
- Banks told to remove all sales incentives for staff
- Customers complain about being pressured to buy financial products
- More needs to be done to protect “vulnerable” customers
- Changes must be made by next year