The country's main retail banks have promised to largely scrap sales incentives for frontline staff and their managers.
The governor of the Reserve Bank Adrian Orr says the regulators also want to see bank boards and senior managers lead by example. Photo: RNZ / Dom Thomas
The incentives emerged as a concern in last year's inquiry into bank behaviour by the Financial Markets Authority and the Reserve Bank.
Their report said consumers had been pressured to buy unnecessary financial products such as credit cards or insurance because frontline staff were trying to meet sales targets and earn commissions.
"Our review highlighted concerns about sales incentives for front-line banking staff. Other banking jurisdictions are also focused on this issue and the commitment to remove these incentives in New Zealand is a significant shift for banks," FMA chief executive Rob Everett said.
"We will now move to monitoring the banks' progress against the plans they have provided."
He said some banks would keep incentives for small parts of their business, but would have to show how they planned to prevent conflicts and check behaviour.
The banks would also be monitored for the broader issues of conduct and culture that were raised by the inquiry. They had all developed plans to improve their system to monitor conduct, handling of consumer complaints, and making it easier for bank staff to blow the whistle on bank practices.
Reserve Bank governor Adrian Orr said the regulators also wanted to see bank boards and senior managers leading by example.
"There is a much bigger concern and question about the culture being instilled and fostered at governance level. Boards are critical in leading the cultural shift that is needed to promote long-term customer outcomes," he said, adding banks would be watched to see how they performed.
The Reserve Bank earlier said the country's biggest bank - ANZ - would be required to deliver two independent reviews on its capital reserves management and how it was being managed at a senior level.
That followed the bank being censured last month and ordered to increase its reserves of capital because its own modelling for calculating financial risks had repeatedly failed.
Commerce and Consumer Affairs Minister Kris Faafoi has previously said he wanted target-based remuneration and incentives banned, and new legal duties imposed on financial institutions.