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Regulators’ report puts spotlight on intermediaries

The FMA and Reserve Bank report into banking conduct and culture has raised concerns about the relationship between banks and intermediaries, in a warning sign for mortgage advisers.

Tuesday, November 6th 2018, 8:03AM 2 Comments

The report into the 11 biggest banks, released yesterday, passed a damning verdict on banks’ sales incentives and policing of staff. It also highlighted a series of issues with intermediary relationships.

The report found a number of banks "highlighted conduct risks associated with their limited oversight of the customer interactions that occur through brokers and other intermediaries”.

While the FMA and RBNZ review does not single out the mortgage advice sector, it also placed the spotlight on the remuneration structures used by banks and third parties. The report raised concerns about whether intermediary pay “impacts customer outcomes”.

In a warning sign for the industry, regulators said “more work” was required to ensure intermediary incentives were “aligned with good outcomes”.

The report said there was “little evidence” New Zealand banks monitored “higher-risk products and distribution channels”, and called on banks to ensure they were “comfortable with the quality of conversations and advice” from intermediaries.

The report echoes concerns raised by Australia’s Royal Commission. The Commission’s interim Haynes report suggested broker sales incentives led to misconduct and called for an end to value and volume-based commissions for mortgage advisers.

The FMA and RBNZ report also criticised the way banks offer advice. It found “inherent conflicts of interest”,  “particularly apparent in vertically or horizontally integrated firms" that manufacture products and provide advice. The regulators said the conflict of interest influenced sales incentives and prevented staff from identifying inappropriate sales.

Banks have until March to respond to individual concerns raised by regulators.

Tags: Adrian Orr RBNZ Reserve Bank

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Comments from our readers

On 7 November 2018 at 11:24 am Barry Read said:
Correct me if I'm wrong, but aren't most other bank distribution channels regulated directly by the FMA as financial service providers/advisers? or is the FMA saying can't banks rely upon that supervision?
On 8 November 2018 at 11:45 am Bikedude said:
Right on Barry. The FMA can now look directly into that advice and Banks can rely on the FMA review process as put forward under the forthcoming regulations. Has to be better than the visibility FMA have had into banks to date. Sure there will be some dodgy Mortgage Brokers, just as there are dodgy bank staff, but with the better visibility these will become much more obvious, and be dealt with accordingly. Provided of course the FMA trades in the wet bus ticket for some decent penalties.

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Lender Flt 1yr 2yr 3yr
ANZ 5.79 4.55 4.79 4.99
ANZ Special - 4.05 4.29 4.49
ASB Bank 5.80 4.44 4.69 4.89
ASB Bank Special - 3.95 4.29 4.49
BNZ - Mortgage One 6.50 - - -
BNZ - Rapid Repay 5.95 - - -
BNZ - Special - 4.10 4.29 4.49
BNZ - Std, FlyBuys 5.90 4.69 4.79 4.99
BNZ - TotalMoney 5.90 - - -
Credit Union Auckland 6.70 - - -
Credit Union Baywide 6.15 5.20 5.25 -
Lender Flt 1yr 2yr 3yr
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.70 4.85 -
Housing NZ Corp 5.80 4.69 4.79 4.79
HSBC Premier 5.89 3.99 4.19 4.69
HSBC Premier LVR > 80% - 3.79 - -
HSBC Special - - - -
Lender Flt 1yr 2yr 3yr
ICBC 5.80 4.59 4.69 5.09
Kiwibank 5.80 4.55 4.69 4.99
Kiwibank - Capped - - - -
Kiwibank - Offset 5.80 - - -
Kiwibank Special - 4.05 4.29 4.49
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 6.10 5.10 5.45 -
Resimac 5.30 4.86 4.94 5.30
RESIMAC Special - - - -
SBS Bank 5.89 4.85 5.05 4.49
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 4.19 3.95 4.49
Sovereign 5.90 4.45 4.69 4.89
Sovereign Special - 3.95 4.29 4.49
The Co-operative Bank - Owner Occ 5.75 4.10 4.35 4.49
The Co-operative Bank - Standard 5.75 4.60 4.85 4.99
TSB Bank 5.80 4.45 4.69 4.99
TSB Special - 3.95 4.19 4.49
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.95 4.69 4.79 5.19
Westpac - Offset 5.95 - - -
Westpac Special - 4.15 4.29 4.59
Median 5.89 4.50 4.69 4.79

Last updated: 2 December 2018 8:39pm

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