Conduct of Financial Institutions regime in a high interest rate environment

SHIFT consultant Natalie Dobson and TSB Senior Manager, Conduct and Culture Caroline Chapman-Smith share some factors Financial Institutions should consider with fresh perspectives and expectations of what treating customers fairly means and requires in practice. Product monitoring and structures to support customers with additional needs have never been more important.

Some factors for consideration: 

  • How well do you know your customer base?  Which customers may be tracking towards financial difficulty?  Which customers may need additional support in the current economic environment?
  • Do you have programmes in place to proactively contact customers who may need support or reassurance? How easy do you make it for customers in difficulty or with worries to contact you?
  • How well are you set up to support customers who may be in financial difficulty, or who may have other additional needs in the current environment (such as customers suffering economic or physical harm, or customers with addiction)?  For example, do you have appropriate training, procedures, escalation processes, external agencies to refer to and delegated authorities?
  • What support do you have in place for your people?  Emotionally challenging conversations are likely to become more frequent – do your people have the support they need to decompress and process these conversations?
  • How well do you know the activities of your debt collection agencies?  What reporting do you get? How do they differentiate between different customers in different circumstances?

Open banking (now officially on the way!) will facilitate better, broader data gathering to help Financial Institutions understand a customer’s complete financial situation (across different banks, KiwiSaver providers, ‘buy now pay later’, etc.). This should provide more sophisticated insights to comply with responsible lending and Conduct obligations in this new environment, and enable Financial Institutions to make well-informed decisions that protect the financial wellbeing of all New Zealanders.

All in time for Christmas, FMA released on 30 November, an Information Sheet on Fair Conduct Programmes, a Guide to Financial Institution licence requirements, and Final Standard Conditions for Financial Institution Licences.