This after FMA received reports that sales targets have been reintroduced
The Financial Markets Authority (FMA) is asking New Zealand banks’ chief executives to reconfirm that they’ve scrapped incentives linked to sales measures for salespeople and their managers, following reports suggesting that sales targets have been reintroduced.
In a letter addressed to bank CEOs, Clare Bolingford (pictured above), FMA executive director of regulatory delivery, noted that all banks were asked by FMA in December 2018 to remove incentives linked to sales measures for salespeople and their managers, no later than the first performance year beginning after Sept. 30, 2019.
These changes, Bolingford said, “were intended to reduce conflicts of interest that can hinder the fair treatment of consumers.”
During FMA’s monitoring of the banks’ progress, in many cases, the authority was encouraged by the changes.
“However, we have also recently received reports of activity within banks suggesting that in some instances, sales targets have been reintroduced or other changes have been made that are not likely to be in the best interests of consumers,” Bolingford said. “We are concerned about these reports and any reports of actions by banks that may result in consumer harm.”
Thus, the FMA is now requesting banks to provide assurance that the incentives they are providing their staff are designed and managed in a way that supports the fair treatment of consumers.
“Reconfirm to us that you did implement changes to your incentive schemes to remove incentives linked to sales measures for salespeople and their managers, and that these changes remain in effect as at the date of this letter. Please provide this confirmation by May 31,” Bolingford said in the letter.
“Reflect on the incentives for your staff and how these are aligned with the outcome of fair treatment of consumers. In this context, we are considering the broad range of actions – including performance management and promotion opportunities – that influence your staff, not just sales-based targets.
“We encourage you to think beyond the influence that sales-based targets can play in consumer outcomes – regardless of whether an incentive payment is made to staff when the target is met – and consider the importance of understanding how all of a firm’s processes, procedures and culture can, directly or indirectly, influence either the right or the wrong behaviour by staff.
“In our future engagements with you, we will be asking you for an update on your reflections and any changes you have made as a result.”
She said FMA has signalled its outcome-focused approach to regulation.
“This approach ensures regulations and rules are a means to an end, rather than an end in themselves,” Bolingford said. “The real end is fair outcomes, which is what we are looking to achieve through our focus on incentive schemes and the behaviours and outcomes that those schemes lead to.”
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