FMA to keep close watch on BNZ’s changes to staff performance scheme

The union says BNZ has reintroduced sales targets for workers.

The Financial Markets Authority says it was told by the BNZ about its plans to change its employee performance management scheme and says the bank will need to show how the move is consistent with new regulations on treating customers fairly to meet new conduct licensing requirements due to open from midyear.

First Union claims employees of the bank have been told to meet sales targets that will be linked to key performance indicators.

Sales targets and the incentives offered for meeting them were exposed during Australia’s Royal Commission into misconduct in the finance sector and a subsequent banking review in New Zealand as giving a poor outcome for consumers.

Banks ditched them here four years ago after the Government began moves to license the conduct and culture of the sector.

A BNZ spokeswoman said the bank was not reintroducing sales targets but had introduced referral goals.

“As we do every year, we have refined our goals for 2023 to ensure our people are very clear on the actions that will help us to deliver great customer outcomes. We have introduced goals around referrals as we believe this provides an important opportunity to serve our customers well.

“None of these changes - which were introduced back in October last year, in any way involve a reintroduction of sales targets linked to incentives.”

Cabinet agreed in February last year (2022) that financial institutions and intermediaries should be banned from offering sales incentives based on volume or value targets to their employees (except senior managers and executives), agents and intermediaries as part of the Financial Markets (Conduct of Institutions) Amendment Act 2022.

But regulations that spell out the details of the law only went to consultation in November and are not due to be finalised until the end of March. Licensing applications are due to start from July, with the law not coming into effect until 2025.

A spokesman for the FMA, which has been charged with licensing and monitoring the sector, said BNZ had informed it of its intentions to introduce changes to its performance management framework.

“Our role currently with banks and insurers is to engage with them ahead of the implementation of the COFI [Conduct of Financial Institutions] regime. This includes reminding them of their future obligations under the regime as well as the risks highlighted in the findings from our bank incentives review and conduct and culture reviews.”

He said the FMA would continue to engage with the BNZ on its plans in the run-up to CoFI licensing.

“...in order to obtain a license they will need to satisfy us they will be compliant, including in the way they are structuring any incentives, and how this aligns with their fair conduct programme.

“We are, and will continue to be concerned with any aspect of a bank’s operations (including potentially its performance management framework) that is inconsistent with the fair treatment of consumers.”

First Union general secretary Dennis Maga said BNZ union members were concerned their interaction with the customers might be distorted because they will be worried about meeting their KPIs.

First Union general secretary Dennis Maga says BNZ workers are concerned about sales targets. Photo / Myles Thomas

Maga said it had requested a meeting with BNZ management to discuss the change and what it could mean for workers and bank customers.

“We need to sit down with BNZ leadership and discuss it. We would like to understand the impact to our members and the public.”

The BNZ spokeswoman said the bank constantly worked with its people to ensure they had clear goals.

“All employers have a fundamental obligation to ensure their employees understand the expectations attached to their roles and how they can achieve those expectations.”

She said a referral could include a situation where a banker identified a customer who had taken out a home loan but did not have insurance, who then referred them to a specialist.

Referrals could also be about removing a product a customer no longer needs, such as a credit card they’re not using but paying fees for, or it could be about education, such as a referral to an appropriate accredited banker to provide advice on a home loan restructure, she added.

“Feedback from our people on their refined goals for 2023 has been positive.”

The BNZ spokeswoman said the changes were in line with its regulatory requirements.

“Our regulator (the FMA) has set clear expectations in relation to the use of sales incentives and the associated risks to customer outcomes for a number of years. We support the FMA’s position and how this will be enshrined in the proposed draft sales incentive regulations to support the Conduct of Financial Institutions regime.”