The overall objective of this review was to understand whether there are widespread conduct and culture issues present in banks in New Zealand.

The conduct of banks directly affects customers. High standards of conduct support the fair, sound, efficient and transparent delivery of banking products and services, as well as confident participation by retail customers, businesses and investors in banking. Poor conduct is a contributing factor to poor customer outcomes and loss of trust in the banking system, and can be associated with other banking risks.

One of the key drivers of conduct is a bank’s culture. Culture influences how management and staff behave on a daily basis. An effective culture within banks includes consistently putting customers at the centre of decision-making, product design, sales and advice processes, and all day-to-day activities.

The FMA and RBNZ are New Zealand’s two main regulators of financial markets. The FMA focuses on conduct regulation of some financial market participants, and the RBNZ focuses on maintaining a sound and efficient financial system through prudential regulation.

Neither regulator has a direct legislative mandate for regulating the conduct of providers of core retail banking services (lending, credit, bank accounts). However, standards of banking conduct are important to the statutory purpose of both regulators, so we decided to test both directly with the banks and with key banking sector stakeholders whether or not there are widespread conduct and culture issues present in New Zealand banks.

Our work set out to assess the maturity of systems, controls and governance around conduct risks within the sector. We decided to focus our review on retail banking services, as these are used by nearly all New Zealanders.