New method to assess good and bad practices of banks coming

New method to assess good and bad practices of banks coming

Transparency International to launch Financial Integrity System next month

Henry Lynch

Wellington, May 10, 2019

Henry Lynch (Picture from Transparency Times)

This month, a Consumer New Zealand survey, found that only 47% of people surveyed said banks can be trusted and only 35% think banks have their best interests at heart.

It is not surprising then that about 70% of New Zealanders agree that banks need to be monitored more closely to protect consumers from irresponsible practices.

The Australian scene

The Australian Royal Commission on Banking and Finance was hard to miss.

The Commission ran for much of last year uncovering unethical and/or immoral practices by high profile banks and insurance companies. 

Wanting practices included the irresponsible sale of products that were not needed by customers, selling products to minors and instances of charging for services long after customers had died.

Of course everyone says, “It couldn’t happen here” and that is the reason that our own Financial Markets Authority (FMA) and Reserve Bank of New Zealand (RBNZ) interviewed some of the leaders of our banks and insurance companies to understand the culture and conduct at the top and what impacts there were for New Zealand customers.

Reviews in New Zealand

The conduct and culture reviews by the FMA and RBNZ found evidence that New Zealand’s banks and insurers are more customer focused than their overseas counterparts.

Image from Bank Conduct and Culture Report, Reserve Bank of New Zealand, November 2018

However, there are still serious issues that need to be resolved for customers in New Zealand.

The Consumers New Zealand survey finds a large proportion of bank customers are unhappy with their treatment. Complaint processes are considered not to work as they should.

Banks, and all of our countries financial services, are fundamental to New Zealand’s integrity systems. Good, ethical, free-from-corruption banking practices make for a good, solid, trusted business. 

Banks, finance and insurance companies are our domestic business partners. They help us buy our homes, run our households, manage the businesses we establish and help grow our individual and collective wealth.

While it is essential we trust them, two out of three people don’t! We can’t just take their word for it that they are good. Customers need to see the evidence.

In some countries, regulation is the best method to ensure business integrity.

In New Zealand there are other avenues that can work in a customer’s favour before regulation is required of our big brand institutions. The easiest and most effective method is the sunlight of transparency.

Financial Integrity System

Transparency International New Zealand (TINZ) has been working to apply its expertise in integrity systems to help New Zealanders know why we should trust our financial institutions.

In June we will formally launch the New Zealand Financial Integrity System Assessment. 

The FISA survey methodology enables Kiwi-based financial organisations to assess their good practices and uncover practices that require improvement. 

The tool is the first integrity assessment tool in the world for the financial services sector. 

It has been over two years in design and creation.

It has been co-designed with representatives from across the financial and business sectors to ensure it is fit for purpose.  Final testing and feedback is currently underway and will be completed to enable a national launch in June.

The finance sector can benefit from participating in FISA.

This is because financial organisations can understand more about the areas of improvement they can make for their customers.

It would potentially enhance their understanding of their competitive advantage. Resultant improved customers’ experiences and trust will help re-build public trust. 

This in turn increases the viability and security of our country’s financial system by setting up a positive spiral of financial integrity for New Zealand.

The Assessment Process

What is the FISA Online Assessment Tool?

The FISA online self-assessment tool has been developed as part of the methodology.

It provides a framework for the CEO to meet with the teams throughout their organisation, to examine the aspects of their internal integrity systems that support culture and conduct.

As well as helping identify poor practices, FISA self-assessment is also a safety test for corruption prevention.

Who is the FISA Online Assessment Tool aimed at?

The bank and insurance companies involved in the conduct and culture review led by the FMA and RBNZ, have been undertaking the extra work required as a consequence of these discussions. With this in mind, FISA has been designed to build on their incremental progress over time.

Most importantly, it broadens the ability for all financial institutions (including banks, insurers, KiwiSaver providers, financial services providers, non-bank deposit takers, building societies) to assess their own performance and make changes where they need to improve their governance and integrity systems.

Feedback on the methods

How do I give feedback on the FISA methodology?

TINZ is encouraging feedback on the FISA methodology before the end of May 2019. 

General comments can be directed to fisa@tinz.nz.org. Please consider doing a detailed review by downloading a copy of the FISA Assessment Methodology and emailing tracked changes back to fisa@tinz.nz.org.

Henry Lynch is a Director on the Board of the Wellington-based Transparency International New Zealand and is involved in the Financial Sector. The above article and picture appeared in the May 2019 issue of Transparency Times.

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