Friday 4th January 2019
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Government backbencher Kieran McAnulty has jumped the queue in trying to impose a code of conduct on banks with a private members' bill lodged just before Parliament's seven-week summer break.
The Labour MP and junior whip lodged the bill on Dec. 18. It would require the Reserve Bank, in consultation with the licensed banks, to issue a code of conduct for lenders. The code would set out good practice for how lenders interact with their clients and clearly outline banks' responsibilities to customers when closing down branches or significantly scaling back service in a particular area.
McAnulty says there's a regulatory gap relating to the delivery of banking products and how banks interact with customers but which doesn't involve financial advice.
"This bill would address that gap by requiring the RBNZ and the registered banks to produce a code of conduct," the bill's general policy statement said. "The code would outline the principles of good banking practice and the banks’ responsibilities to its customers in the event of a branch closure or significant reduction in available services."
Banking conduct has already come under the spotlight over the past year. The Reserve Bank and Financial Markets Authority investigated conduct among local lenders after an Australian Royal Commission into financial services uncovered widespread misdeeds across the Tasman.
The RBNZ and FMA didn't find the same sort of misconduct as the Australian inquiry, but did discover significant weaknesses in lenders' internal processes for monitoring conduct.
The Reserve Bank didn't think there were any regulatory gaps from a prudential supervision point of view. However, the FMA said there were a number of holes, particularly around the lack of conduct requirements in the delivery of banking products without financial advice.
The FMA said its own limited mandate in dealing with banking conduct and the central bank's resourcing constraints probably contributed to the industry responding to conduct risks more slowly and shallowly than would be the regulator's preference.
McAnulty's bill, which has yet to be drawn in the random ballot process for Members' Bills, could pre-empt the timetable set out for dealing with the issues when the RBNZ/FMA report was released in November.
At that time, Prime Minister Jacinda Ardern and Commerce Minister Kris Faafoi said legislation to improve oversight was likely to come after the banks had reported back in March on individual programmes worked up for them by the regulators. It would also let ministers consider any new issues raised in the final report of the Australian Royal Commission, due in February.
In a cabinet paper published on the Ministry of Business, Innovation and Employee website, Finance Minister Grant Robertson and Faafoi proposed that the government revisit the potential regulatory gap, which would require considerable policy work. MBIE would lead the policy work and report to Faafoi.
"Without pre-empting the policy process, it is possible that a solution could require new legislative requirements," the cabinet paper said. "If this is the case, consideration will need to be given to what these requirements could be, how they fit with existing legislation, such as the Financial Markets Conduct Act, and appropriate enforcement mechanisms."
McAnulty's bill, as written, would require lenders to provide six-monthly reports to the RBNZ on the number of complaints they received against the code, how those issues were resolved, and any other information required by the central bank. It wouldn't impose financial sanctions, rather it adopts "the approach that sunlight is the best disinfectant."
The RBNZ would then have to publish reports on the total number of complaints received, how they were dealt with for the system as a whole, and also for each individual lender.
Private banks currently have a voluntary code of practice that was recently updated by its lobby group, the New Zealand Bankers' Association. Its complaints process uses the Banking Ombudsman to help deal with complaints a bank can't resolve on its own. The ombudsman fielded 2,433 complaints in the June 2018 year, down from 2,741 a year earlier.
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