As of this week, new financial conduct standards have taken effect in New Zealand under the Conduct of Financial Institutions (CoFI) regime, with the Financial Markets Authority (FMA) assuming an expanded oversight role.
The framework, effective March 31, requires licensed financial institutions to implement fair conduct programs to ensure consistent consumer protection. Under the new regime, the FMA has issued a total of 77 licenses to 46 insurers, 17 banks, and 14 non-bank deposit-takers. "CoFI is fundamentally about treating customers fairly," said Michael Hewes, Director of Deposit Taking, Insurance, and Advice at the FMA.
CoFI requires that institutions monitor product performance, communicate clearly with customers, and act swiftly when issues arise. "The approach focuses on the most significant risks and opportunities," said Clare Bolingford, Executive Director of Regulatory Delivery at the FMA. Going forward, the FMA is also planning to implement a new supervisory model, through which it will seek to increase its engagement with executives and boards and expand its use of on-site and remote reviews to assess conduct.
In an In Focus article from our 2021 Compendium, Clare Bolingford, then the Director of Banking and Insurance at the FMA, explained how the regulator has sought to improve conduct in the financial sector by laying out desired outcomes, rather than writing more rules.
"The focus of bank leaders should be on identifying and acting on behaviours that produce poor customer outcomes over time—and the implementation of this approach is ultimately an exercise in change management," she writes. "Unfortunately we have seen firms spending a lot of time and money developing voluminous compliance manuals and processes that fail to deliver much value for their business or their customers. We want to avoid this happening again." ▸ Read More
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