The Government will put in place a new regime which requires banks and insurance providers to meet a high standard of customer treatment.
The Government will put in place a new regime which requires banks and insurance providers to meet a high standard of customer treatment.
The Government will ban target-based sales incentives for bankers which it says puts "profits ahead of people" in response to reports from New Zealand's banking watchdogs.
This is despite the fact most banks have already committed to removing sales-based incentive schemes from their operations.
The Government will also put inplace a new regime which requires banks and insurance providers to meet a high standard of customer treatment.
If they fail to meet these standards, they will face "strong financial penalties" of up to $5 million, says Commerce and Consumer Affairs Minister Kris Faafoi.
The moves come in response to reports from a joint Financial Markets Authority (FMA) and Reserve Bank probe of the country's banking and insurance industry.
They found that wholesale changes were needed for the life insurance industry to clean up its act and that insurers were too focused on making sales and not enough on their customer needs.
When it came to banks, the regulators said there were big issues when it came to boards and said greater accountability was needed.
Faafoi said this morning that the Government would soon introduce legislation which would require banks and insurers to put systems in place to make sure they treat their customers fairly.
If banks and insurance providers fail to meet these standards, they will face "strong financial penalties," according to Commerce and Consumer Affairs Minister Kris Faafoi.Photo / Mark Mitchell
At the top of this list is making it illegal for banks to provide sales incentives, such as overseas trips and bonuses for selling financial products, to their employees.
"The days of the trips to Rome are gone," Faafoi said.
The Government moved to make it illegal for insurance providers to offer incentives in January this year.
In response to the Reserve Bank and FMA reports, most of New Zealand's banks have already put in place policies which ban sales incentives for staff.
But Faafoi said if the Government didn't enshrine the ban into law, some banks could easily go back to using incentive schemes.
The legislation, which will be introduced to Parliament later this year, will also mean banks and insurers will have to apply for a new licence from the FMA.
Once issued, the licence requires the institutions to implement effective policies, processes, systems and controls to meet the fair treatment standard.
If this standard is not met, banks will face hefty fines.
"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," Faafoi said.
National's commerce and consumer affairs spokesperson Brett Hudson said he would be watching closely to see whether these proposals genuinely make a difference.
"Some sales practices in the banking and life insurance industries needed to be dealt with. But, as is the case with all complex financial regulation, the devil is always in the detail.
