The Financial Markets Authority has called on the Government to address certain ‘gaps’ in the framework for regulation of banks.
In the recently released report on its joint review with the Reserve Bank into bank conduct, the regulator noted that “…the current regulatory settings do not provide sufficient scope for regulators to hold banks to account for their conduct”.
The report presented a number of considerations for the Government to address, which included:
- Establishing basic legal duties on banks to protect or enhance customer interests and outcomes
- Requiring banks to have adequate systems and controls to govern, manage and remediate conduct risk
- Providing regulators with sufficient supervision and enforcement powers and resources to ensure banks meet these obligations, including requiring better information on conduct issues or risks and the option of penalties to incentivise appropriate behaviour
- Clarifying accountability and individual responsibility for management of conduct, including the potential for direct liability for senior managers
Commerce and Consumer Affairs Minister, Kris Faafoi, responded to the report, saying the Government will consider the report’s recommendations on the regulatory environment for bank conduct and decide on whether regulations need to change.
Current work already focused on improving the regulation of New Zealand’s financial system include:
- The Financial Services Legislation Amendment Bill
- Changes to the Credit Contracts and Consumer Finance Act
- A review of insurance contract law
“Ultimately, New Zealand banks need to step up and take greater responsibility for their systems and processes, so that consumers can have confidence that their finances are in safe hands,” said Faafoi.