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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
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

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