Conduct of financial institutions review

The Government is introducing a new regulatory regime to govern conduct in the financial sector.

In late 2018 and early 2019 the Financial Markets Authority and the Reserve Bank of New Zealand published two joint reviews into the conduct and culture of banks and life insurers in New Zealand.

These reviews identified a number of issues with bank and insurer conduct, and gaps in how we regulate them.

As a result of these reports, and the findings of the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the Government consulted on potential options to improve the conduct of financial institutions to ensure good outcomes for customers. Consultation closed on 7 June and 85 submissions were received.

Conduct of financial institutions review discussion paper

Read the submissions(external link)

New financial conduct regime

Following public consultation on options and discussion with industries bodies to inform drafting, the Government introduced new legislation regulating the conduct of financial institutions on 11 December 2019.

The Financial Markets (Conduct of Institutions) Amendment Bill will:

  • Require banks, insurers and non-bank deposit takers (together, financial institutions) to be licensed in respect of their general conduct towards consumers. The licensing regime will be monitored and enforced by the Financial Markets Authority.
  • Require financial institutions and their intermediaries to comply with a principle to treat consumers fairly, including by paying due regards to their interests.
  • Require financial institutions to establish and maintain effective programmes throughout their businesses that ensure they meet the requirement to treat consumers fairly.
  • Require both financial institutions and their intermediaries to comply with an institution’s conduct programme (except to the extent that an intermediary is a financial institution in its own right, or a financial advice provider providing regulated financial advice).
  • Require financial institutions to ensure intermediaries comply with the conduct programme (except intermediaries that are financial advice providers or other financial institutions).
  • Require financial institutions and intermediaries to comply with regulations that regulate incentives. These regulations will be able to prohibit sales incentives based on volume or value targets, e.g. soft commissions such as overseas trips, bonuses for selling a certain number of financial products, leader boards, and performance management based on volume of sales.

Next steps

The Bill will progress through a Select Committee process in 2020, during which stakeholders will have an opportunity to submit on the legislation. Regulations will also be necessary to support the operation of the licensing regime and incentives prohibitions and will be developed following a further policy and consultation process.

Feedback welcome

We welcome feedback at any time about our work on the conduct of financial institutions. If you would like to contact us, please email

Related documents and information

Review of insurance contract law

You may also be interested in the insurance contract law review which is currently underway.

Last updated: 17 December 2019 Last reviewed: 25 September 2019