With the Conduct of Financial Institutions (CoFI) legislation having kicked in from March 31, one of the things that the Financial Markets Authority (FMA) will be focusing on will be how quickly banks pass on changes in the official cash rate (OCR) to borrowers.
“I can assure you that the time taken to pass on changes in the OCR to banks’ customers will be something that we will be paying very close attention to,” FMA chief executive Samantha Barrass told parliament’s finance and expenditure committee.
“That cuts to the heart of their treatment of customers that we expect from the banks,” Barrass said.
She was answering a question from Green Party co-leader Chloe Swarbrick who detailed someone wishing to make a complaint before March 31 being passed by the Commerce Commission to the FMA and to the banks themselves.
Swarbrick said bank reactions to OCR changes were “up like a rocket, down like a feather” and she wanted to know how the FMA is going to enforce CoFI.
“I would like to think that we won’t have to wait for enforcement action. We have proactive supervision powers and that is the big change,” Barrass said. The FMA won’t just be waiting for things to go wrong.
Formal investigations tent to take a long time and she would prefer that the banks make changes more quickly than awaiting the outcomes of investigations.
“I can assure you that the time taken to pass on changes in the OCR to banks’ customers will be something that we will be paying very close attention to,”
Earlier, Barrass said one example of what the FMA has done was to call out banks offering multi-product discounts that they weren’t actually applying because their systems weren’t adequate to the task.
Ahead of the CoFI legislation coming into force, the FMA had acted on this so that bank customers can have confidence banks will deliver what is offered, she said.
Barrass said the New Zealand financial services sector isn’t heavily regulated, based on her experience in Britain, Europe and the US.
Before joining the FMA, Barrass was the chief executive of the UK’s Business Banking Resolution Service and she had previously worked for the London Investment Banking Association, advocating on behalf of investment banks with UK, EU, and global regulators.
“I think NZ is potentially well-positioned to get regulation right,” she said.
“We don’t have the overhang of legacy regulation” and it is mainly focused on outcomes, she said.
Businesses in the sector do complain about regulation and “I completely get it” from a startup FinTech’s point of view, but NZ regulation is less complex than in other countries.
The FMA has a strong relationship with the prudential regulator, the Reserve Bank, and is working with it so that those in the sector will be able to file single annual returns, she said.
The FMA also has “a very active approach” to providing exemptions so it can ensure that regulation remains proportionate.
NZ is behind other countries in introducing open banking and so the FMA has started a “sandbox” pilot scheme to try to make it easier for start-up FinTechs to enter the NZ market, “so we can hold their hands,” she said.
It currently has 24 applications and will be whittling that down to six for the pilot scheme, Barrass said.
Barrass said the FMA has worked to ensure that mortgage advisers are able to provide customers with a “genuine” range of options across the market and it can step in if that’s not happening.
