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Govt to remove personal liability for bank directors

The government has decided to remove the due diligence duty and the associated personal liability for directors and senior managers of financial institutions,” commerce and consumer affairs minister Andrew Bayly told the Financial Services Council conference.

Thursday, September 5th 2024, 4:12PM 2 Comments

The government is also changing the law to lessen the liability of financial institutions which fail to provide information or which provide incorrect information – there is a class action suit in progress against ANZ Bank New Zealand as ASB for exactly those failings.

“Whilst it is totally appropriate that lenders should be accountable for poor lending practices, extending these requirements at a personal level is a step too far,” Bayly said.

“Thankfully, partly due to the decision to introduce a licencing framework, cabinet has agreed these are no longer appropriate. I expect this change will lead to less conservative lending practices.”

Bayly acknowledge the class action suits currently underway, saying the two banks' failings “in some cases these are largely of a technical nature and unlikely to have resulted in financial loss to the borrower,” he said.

“We wish to change the onus on the lender to prove the consumer was not harmed to the onus being on the consumer to show they were,” Bayly said.

"This will reduce the administrative burden on lenders, lead to more common-sense decisions, and reduce the number of incidences where lenders are punished despite a lack of harm.”

Bayly said the changes “signify a significant shift in consumer credit regulation away from the prescriptive and restricting landscape of old and towards a more proportionate, risk-based approach.”

The government also plans to streamline conduct regulation to simplify fair conduct programmes to “ensure they are fit for purpose and can be tailored to account for the nature of the business at hand,” he said.

Financial institutions Conduct of Financial Institution (CoFi) reports will need to incorporate how institutions engage appropriately with their clients and customers, how they develop new policies and products to ensure they are fit for purpose and meet regulatory requirements and the nature of adequate complaints processes.

Bayly said the Financial Markets Authority (FMA) will streamline its licencing model so that providers of multiple market services only need to hold a single licence with the changes taking place following completion of the registration of the CoFi lecence process after March 31 next year.

All existing conduct licences will be grandfathered into the new single conduct licence.

Bayly said the FMA will be given new powers to rely on assessments by the Reserve Bank to reduce duplication, such as on cyber security and the fitness of senior managers.

The FMA will also be able to review a change in control before that change happens.

It will also be able to make on-site inspections without notice as a last resort.

“To be clear, this power will only be available once all other avenues have been tried and is only intended to be used in extreme cases,” Bayly said.

The government is also looking at creating a single dispute portal for consumers. “A single 'front door' for the various services will simplify this process and improve awareness,” he said.

“The key takeaway is that this government is committed to reducing red-tape and regulatory burden to make it easier for households and businesses to access finance when they need it.”

Among other changes the government is planning is to facilitate more KiwiSaver funds being invested in unlisted assets as well as implementing all of the Commerce Commission's 14 recommendations to improve competition for personal banking services.

Tags: Andrew Bayly

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Comments from our readers

On 5 September 2024 at 4:41 pm JeffQV said:
Good news and brings back 'captain sensible' lending decisions to those who know best. Lenders.
On 6 September 2024 at 10:06 am Aggressively_passive said:
Put on some popcorn and watch the professional wrist-wringers clutch their pearls in a collective fainting spell of worry for the poor innocent consumers who "might" be "harmed"...

can't wait to see how this is framed. Let's play leftybuzzword bingo:
today's words are:
- protection
- Netflix
- excessive profit
- consumer harm
- vulnerable

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 5.94 - - -
AIA - Go Home Loans 8.49 ▼6.19 ▼5.69 ▼5.69
ANZ ▼7.89 6.79 6.29 6.29
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 6.19 5.69 5.69
ASB Bank 8.39 ▼6.19 ▼5.69 ▼5.69
ASB Better Homes Top Up - - - 1.00
Avanti Finance 8.90 - - -
Basecorp Finance 9.60 - - -
BNZ - Classic - ▼6.19 5.79 5.79
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One ▼7.94 - - -
BNZ - Rapid Repay ▼7.94 - - -
BNZ - Std ▼7.94 6.45 5.89 5.79
BNZ - TotalMoney ▼7.94 - - -
CFML 321 Loans 6.70 - - -
CFML Home Loans 6.95 - - -
CFML Prime Loans 8.75 - - -
CFML Standard Loans 9.70 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - ▼5.99 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 8.15 ▼6.19 ▼5.75 5.69
Co-operative Bank - Standard 8.15 ▼6.69 ▼6.25 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 6.60 6.10 -
First Credit Union Standard 8.50 7.20 6.70 -
Heartland Bank - Online 7.99 6.69 6.35 6.15
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.00 6.50 -
ICBC ▼7.49 ▼6.15 ▼5.69 ▼5.69
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 8.25 7.19 6.69 6.59
Kiwibank - Offset 8.25 - - -
Kiwibank Special - 6.29 5.79 5.79
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 8.75 6.69 6.19 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 8.49 ▼6.95 ▼6.29 ▼6.29
SBS Bank Special - ▼6.35 ▼5.69 ▼5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 5.94 5.45 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
TSB Bank 9.19 7.09 6.59 6.59
TSB Special 8.39 6.29 5.79 5.79
Unity 8.64 6.29 5.79 -
Unity First Home Buyer special - 6.20 - -
Wairarapa Building Society 8.50 ▼6.50 ▼5.89 -
Westpac 8.39 6.89 6.39 6.39
Westpac Choices Everyday 8.49 - - -
Westpac Offset 8.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 6.29 5.79 5.79
Median 8.39 6.47 6.10 5.79

Last updated: 9 October 2024 9:07am

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