Writing in KPMG's latest quarterly report on the performance of financial institutions, KPMG's risk consulting director Kate Stewart and colleague Malcolm Bruce say CoFi “actually provides opportunity for financial institutions to do what's right for their business, as well as the customers they serve.”
The announcement by National leader Chris Luxon at the Financial Services Council conference last month “created a level of uncertainty into what has been a well-accepted regulatory change,” say Bruce and Stewart, who joined KPMG from the Financial Markets Authority (FMA).
The CoFi legislation “essentially brings banks, insurers and non-bank deposit takers into a regulatory regime that would provide protections for consumers that don't currently exist in New Zealand's regulatory landscape,” they say.
“It's hard to argue institutions should not treat their customers fairly, nor that they should have customers at the heart of the way their businesses operate.”
They note the industry has been “pretty slow” at getting ready to apply for licences and to implement any changes needed for compliance – the Act comes into force at the end of March 2025 but licensing opened in July this year.
The KMPG writers note that CoFi is principles-based rather than a set of rules, and argue that institutions should be using it to “really think differently about CoFi as not just a piece of regulatory change, but as an opportunity to build in fair treatment for their customers at the design stage,” they say.
That would make firms “compliant by design, which can assist in demonstrating what they're doing for customers as well as provide benefits for their institutions.”
Some institutions are full-steam-ahead in preparing for the changes, but others “have pushed the pause button” but face “a major risk” in delaying further work on CoFi.
Without CoFi, the industry faces the major risk that the FMA will launch more court action.
The KPMG writers note the FMA “has used the powers they already have in the Financial Markets Conduct Act” to tackle misleading and deceptive conduct and “enforce against the most egregious examples of what were frankly a sloppy and careless approach to customers.”
Implementing CoFi requires institutions to do some “deep thinking” about what “fair” really means and to have “tough conversations” about existing policies or processes, they say.
