FISA Introduction

The New Zealand Finance Integrity System Assessment (FISA) is the first ever review of the integrity system of any country’s financial sector. Transparency International NZ (TINZ) will lead the review.  As an independent civil society organisation, it is uniquely placed to ensure both independence and objectivity. The FISA covers a wide range of financial organisations as well as government and industry agencies with oversight and regulatory roles in the finance sector.  

Why the time is now?

The Reserve Bank of New Zealand (RBNZ) and Financial Markets Authority (FMA) review into Banks, November 2018, found that “Overall, there are weaknesses in the governance and management of conduct risks, and significant gaps in the measurement and reporting of customer outcomes”.

They noted that there was “significant variation in the maturity of banks’ approaches to identifying, managing and remediating conduct risks and issues”, with some banks described as “reactive at best, and complacent at worst”. 

Their review into the Insurance sector was more concerning, finding “extensive weaknesses in life insurers’ systems and controls… governance and management of conduct risks is weak and there is a lack of focus on good customer outcomes.” The report urged Insurers to act urgently as the industry is vulnerable to misconduct and escalation of issues, additionally noting there were instances of poor conduct and existing examples of potential misconduct (i.e. breaches of the law).

The Hayne review in Australia (February 2019), was hugely critical of the financial sector there with recommendations aimed at answering four key questions:

  • How can the law be simplified so that its intent is met?
  • How should the approach to conflicts of interest and conflicts between duty and interest change?
  • What can be done to improve compliance and the effectiveness of the regulators? and
  • What more can be done to achieve effective leadership, good governance and appropriate culture so that financial services entities obey the basic norms of behaviour that underpin the proper regulation of the financial services industry?

Whilst New Zealand is different from Australia, many in its financial sector are owned or backed by Australian companies. FISA is an opportunity to differentiate the New Zealand financial system and highlight areas where its integrity systems are strong and those for further improvement.

The time is now; financial organisations and insurers can no longer afford to be complacent.  With FISA, financial organisations can take accountability back, front foot change and lead remediation and improvement themselves.  All financial organisations have the opportunity now to ‘stand up’ or risk being bystanders to regulated change.

The aim the FISA assessment is to:

  • Build trust and confidence, nationally and internationally, in New Zealand’s financial system
  • Examine the current state of the integrity systems of New Zealand’s financial system
  • Foster and support good conduct, and motivate the development of new initiatives and tools that support good conduct and prevent and combat corruption, and
  • Reinforce a culture of integrity in a way that realises its benefits.

The FISA will provide customers, citizens, communities, civil society organisations, government and businesses detailed information about the way that the financial system identifies and seeks to prevent corruption. 

This will enable them to identify good performance and push for improvement. Financial organisations will have a blueprint for improvement enabling them to set clear priorities for preventing corruption while seeking the additional returns that come when organisations adopt a pro-active role to promote their integrity.

Brian Yee of Making Strategy Happen led the development of the FISA Strategy which included consultation across the Financial Sector, including with representatives from financial organisations and regulators. 

The FISA strategy is create a virtuous cycle generated by the following stages;

  1. the online self-assessment completed by financial organisations – banks, finance companies, kiwi-saver providers and insurance companies
  2. the publication of the anonymised results of the self-assessment
  3. the review and context provided by the independent assessment
  4. the development of TINZ tools for professional services firms as a basis of their advice to their financial services clients and then the next annual self-assessment.

FISA STRATEGY ** – Virtuous cycle – continuous improvement through self-assessment, the design and implementation of tools to improve corruption prevention and to sustain strategies aimed at growth in productivity.