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FMA RBNZ Bank Conduct and Culture Review November 2018

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The overall objective of this review was to understand whether there are widespread conduct and culture issues present in banks in New Zealand.

The conduct of banks directly affects customers. High standards of conduct support the fair, sound, efficient and transparent delivery of banking products and services, as well as confident participation by retail customers, businesses and investors in banking. Poor conduct is a contributing factor to poor customer outcomes and loss of trust in the banking system, and can be associated with other banking risks.

One of the key drivers of conduct is a bank’s culture. Culture influences how management and staff behave on a daily basis. An effective culture within banks includes consistently putting customers at the centre of decision-making, product design, sales and advice processes, and all day-to-day activities.

Our work set out to assess the maturity of systems, controls and governance around conduct risks within the sector. We decided to focus our review on retail banking services, as these are used by nearly all New Zealanders.


Our review found a small number of issues related to poor conduct by bank staff. Issues relating to system or process weaknesses were more commonplace. Based on these findings, conduct and culture issues do not appear to be widespread in banks in New Zealand at this point in time. However, we are concerned about banks’ lack of proactivity in identifying and remediating conduct issues and risks in their business. More broadly, we identified weaknesses in the governance and management of conduct risks. This is a vulnerability that, if left unchecked, has the potential to lead to widespread issues.

We make a number of recommendations to improve oversight, controls and processes. Boards and senior management need to ensure these improvements are made with a sense of urgency. However, these measures will prove unsustainable if a bank does not have a truly customer-focused culture.

Banks have started to consider culture and conduct issues, but this work has generally been slow and relatively recent, and mainly in response to overseas events. Most of the initiatives we have seen only begin to address issues and risks, and do not go deep enough.


Our review confirmed that all 11 banks need to more effectively identify, manage, remediate and report on conduct risks and issues, to deliver consistently good outcomes for customers. Banks need to proactively work to achieve maturity in this area.

We will be providing individual feedback that is specific to each bank, along with our general observations. Each bank will need to provide us with their plan to address our feedback by the end of March 2019, and then report to us on their progress implementing the plan. We will monitor progress, and take further action if we are not satisfied with the outcome or level of urgency.

There are five key aspects of our findings and recommendations that are common to all banks, and should form the basis of their plans.

All financial services providers, including those operating in the wholesale space, would also benefit from assessing their conduct against these themes.

Board ownership and accountability for conduct and culture

Identify and remediate issues

Strengthen processes and controls

Staff reporting channels