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

New financial conduct regime

Following public consultation, a package of options was announced by the Government on 25 September 2019. The new regime will:

  • Create a licensing regime for banks, insurers and non-bank deposit takers (such as credit unions) regarding their general conduct. These institutions will be licensed by the Financial Markets Authority.
  • Require licensed institutions to meet a fair treatment standard (for example, to pay due regard to the needs and interests of customers and treat them fairly)
  • Require licensed institutions to implement, effective policies, processes, systems and controls to meet the fair treatment standard. Regulations will specify what these policies, processes, systems and controls must include.
  • Outline what obligations financial institutions have in relation to remuneration and any other sales incentives, and how they must manage the risks those incentives create.
  • 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 the volume of sales). This prohibition will apply to banks, insurers, non-bank deposit takers and their intermediaries.
  • Make licensed entities accountable for sales to consumers by the entities contracted intermediaries who are not financial advice providers (non-adviser intermediaries include car dealers, retailers selling add-on finance and insurance, and travel agents or airlines selling travel insurance).

Read the Cabinet paper relating to approval of the regime [PDF, 199 KB]

Read the Cabinet minute relating to approval of the regime [PDF, 214 KB]

Read the Regulatory Impact Statement relating to the proposals (updated December 2019) [PDF, 704 KB]

Next steps

Legislation will now be drafted to implement the new regime. The intention is to introduce this legislation to Parliament by the end of 2019.

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

Review of insurance contract law

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

Last updated: 25 September 2019 Last reviewed: 25 September 2019