The licence was introduced after an FMA and RBNZ 2018 review found banks and insurers were not creating systems and processes to ensure consumers were treated fairly.

All registered banks, licensed non-bank deposit takers and insurers need to have the licence by the end of March 2025. However, pre-election, Andrew Baylay, National’s then commerce and consumer affairs spokesman and now the minister in the coalition Government, said he would scrap the Conduct of Financial Institutions (CoFI) legislation under which this licence falls.

At the time he said there was enough legislation covering financial institutions without another layer which was costly and would be ineffective.

Gold Band Finance chief executive Martin Brennan says applying for the licence was a good exercise in sorting out the required disciplines. “Our view was the sooner we started the sooner we would embed the disciplines.

“The other technical fact we were mindful of is the Deposit Takers Act. There is going to be a fair bit of work required around that and we didn’t want a perfect storm of having to handle two pieces of legislative implementation at the same time.”

While Brennan feels there were no identified conduct issues in the non-bank deposit takers sector before and after the review, he says getting the licence demonstrates the importance of having a documented and fit-for-purpose fair conduct compliance programme.

“It documents already existing values and behaviours our people have to measure, monitor and control on how we develop, offer and deliver products and services that are fair for all our customers – borrowers and investors alike.”

Gold Band found the FMA good to deal with through the licensing process, but Brennan says the lesson was a realisation of the ongoing requirements for licence compliance.

He describes it as “prove you do it rather than just say you do it” type discipline. “We were doing a lot of things the license required but didn't have a system to prove that we were doing them – training, for example.

“Now we've done the implementation, as long as it’s maintained, it shouldn't be too much of an impediment on us.”

While many other financial institutions appear to be holding off getting the licence waiting to see what the Government decides to do with CoFI, Brennan says he would encourage them to start the process.

“Even if the legislation is going to change, it is still a worthwhile exercise to look at the way business is run with fresh eyes. The sooner it is started, the more time a financial institution has to implement any deficiencies they may have within their organisation.”

Crack on

Other membership organisations, law firms and professional service organisations are recommending members and clients get on with their CoFI implementation.

Malcolm Bruce, partner - consulting at KPMG New Zealand told Law News the current CoFI licensing timetable and other obligations remain in force and have deadlines that will require compliance.

“We encourage organisations to continue working on CoFI requirements and to think about how they can truly put customers at the heart of their business operations to systematically treat customers fairly in a way that works for all stakeholders. We believe this will ensure better outcomes for customers, staff and probably long-term bottom line results.”

The New Zealand Banking Association is recommending members “crack on”.

Chief executive Roger Beaumont told Law News banks are working to implement the requirements of CoFI, including developing their fair conduct programme.

Even the Financial Services Federation, which has been more vocal in its opposition to CoFI, says it realises member organisations need to prepare for licensing.

As law firm Minter Ellison Rudd Watts partner Lloyd Kavanagh puts it, at this stage any repeal of CoFI is speculation. He says any changes require legislation and the consent of Parliament and cannot be done by press release.

He told Law News if on reflection full repeal is thought to be a step too far, certain areas of the CoFI legislation could be “refined” by the new Government, including some elements of the fair conduct principles.

For example, the fair conduct principle that lists ways of treating customers fairly could be made clearer. Instead of saying “includes the following”, it would be better to say “means”, so we are not speculating as to whether there is something that is not on the list.”