The FMA has set out its priorities for the coming year in its annual corporate plan, with the ongoing conduct and culture review into the financial sector taking the spotlight.
The review was described as a ‘seized opportunity’ following the events of the Australian royal commission, which the FMA says created a ‘burning platform’ and led to in-depth investigations that would otherwise have taken much longer to set into action. The regulator has received banks’ responses to requests for proof that they have no systemic misconduct issues, and says it is now looking to get behind the paperwork and establish the reality of what is happening behind the scenes.
“We’re trying to establish why some firms that may have the best governance and incentive structures on paper still seem to foster behaviours that don’t align with that,” said FMA chief executive Rob Everett. “We want to get behind the design and actually test whether what they’re doing is translating into better outcomes.”
“One of the great opportunities this has afforded is for us to work more closely with the Reserve Bank,” he stated. “It has been taking a very close interest in behavioural and conduct issues that might previously have been left to us, and I would hope that the ongoing monitoring and supervision of the big players will receive the full weight of both agencies.”
Nonetheless, Everett admitted that there were challenges in encouraging whistleblowers, who may have witnessed misconduct, to come forward. With limited protections available to whistleblowers in New Zealand and no central avenue for complaints, Everett said he is ‘sceptical’ about New Zealand’s low complaint level both from customers and staff.
“Some of our low complaint level may reflect a culture of willingness to put up with the bad stuff,” he said. “We may look at giving people a clearer and easier avenue to have a gripe about what they’ve experienced, so that the issue can be properly identified. Part of our process will look into why there haven’t been more complaints.”
The review is still a long way from its final report; however, based on current observations, Everett says the financial services sector’s understanding of good customer outcomes is ‘patchy’ at best. The FMA is now looking to strengthen its scrutiny and zone in closer on areas of potential misconduct.
“While we’ve seen shifts happening in some areas, we’re not seeing tangible evidence of progress in others,” said Everett. “We’re growing impatient as to how to respond to that, and we will continue to be more deliberately assertive around places where behaviours don’t stack up.”