Your browser is not supported

Our website does not support the browser you are using. For a better browsing experience update to a compatible browser like the latest browsers from Chrome, Firefox and Safari.

Thematic review of bank conduct and culture

In 2018, we completed a joint review with the Financial Markets Authority into the conduct and culture of New Zealand's 11 largest retail banks. The review was the first of its kind in New Zealand. This page discusses the findings of the review and next steps.

Review findings

The regulators (the Reserve Bank of New Zealand and the Financial Market Authority) found significant weaknesses in the governance and management of conduct risks. These weaknesses have resulted in a number of issues needing remediation. Banks’ lack of proactivity in identifying and remediating conduct issues and risks means vulnerabilities remain.

The regulators concluded banks need to significantly improve their approaches to identifying, managing and dealing with conduct risk.

The regulators also found a small number of issues related to poor conduct by bank staff, which the banks are following up. However, based on their findings, the regulators do not consider that widespread misconduct or poor culture issues currently exist across banks in New Zealand.

Review report

This report outlines the findings from the review:

Recommendations and next steps

All 11 banks reviewed received individual feedback and had to report back and provide plans to address regulators’ feedback by the end of March 2019.

The main areas identified for improvement included:

  • greater board ownership and accountability, including being able to properly measure and report on conduct and culture risks and issues
  • prioritising the identification of issues and accelerating remediation
  • prioritising investment in systems and frameworks to strengthen processes and controls
  • strengthening staff reporting channels, including whistleblower processes for conduct and culture issues
  • removing all incentives linked to sales measures and revising sales incentive structures for frontline salespeople and through all layers of management.

Regulatory issues

While banks have the main responsibility for developing strong governance and management frameworks for conduct risk, the current regulatory settings do not provide enough scope for regulators to hold banks to account for their conduct.

The report sets out a number of options the government could consider to address these issues.

About the review

  • 11 retail banks that account for 99% of household deposits were reviewed over a four-month period. This comprised 391 interviews with more than 500 bank staff in 13 towns and cities, including directors, managers and frontline workers.
  • The review was not an audit of individual files or accounts, or a detailed investigation of historical cases like the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (ARC).
  • In addition, the regulators sought input from six banking sector stakeholders including consumer advocacy groups, bank workers’ unions, the Banking Ombudsman and NZ Bankers’ Association. They also carried out a consumer survey of 2,000 bank customers.
  • Despite the lack of specific conduct regulations for banks, the regulators used the international focus on banking conduct at that time and their general responsibilities for overseeing governance and risk management as the impetus for this review. But neither regulator had an express mandate or resource to regulate overall bank conduct.
  • The Commerce Commission was kept informed during the process.
  • The Financial Market Authority completed its own separate thematic review into bank incentives structures, published on 15 November 2018.


Go to the Financial Market Authority website