WELLINGTON, Nov. 5 (Xinhua) -- The Financial Markets Authority (FMA) and Reserve Bank of New Zealand (RBNZ) have completed their four-month joint review into the conduct and culture of 11 New Zealand banks, the first of its kind in the country.
The regulators identified significant weaknesses in the governance and management of conduct risks. These weaknesses have resulted in a number of issues that require remediation, a RBNZ statement said on Monday.
Banks' lack of proactivity in identifying and remediating conduct issues and risks means vulnerabilities remain, the statement said, adding the overall standard of banks' approaches to identifying, managing and dealing with conduct risk needs to improve markedly.
"The governance of conduct risk in the banks requires serious attention," said Rob Everett, FMA chief executive, adding the FMA published a guide to good conduct in February 2017, but some banks have only now started to consider these issues, with most of the initiatives not going deep enough.
Adrian Orr, Reserve Bank governor, said that banks have a responsibility to ensure customers receive products and services they understand and suited to customers' needs on an ongoing basis. Failure in this responsibility exposes customers, banks, and the wider economy to unnecessary risk, as dramatically demonstrated by the recent Global Financial Crisis.
All 11 banks reviewed will receive individual feedback. Each bank must report back and provide plans to address regulators' feedback by the end of March 2019.
Key areas identified for improvement include strengthening staff reporting channels, including whistleblower processes for conduct and culture issues; and removing all incentives linked to sales measures and revising sales incentive structures for frontline salespeople and through all layers of management.
