Bank customers are central to FSCA’s new conduct standards
Products need to ‘perform as promised’ and clients need to understand what is being sold to them
The Financial Sector Conduct Authority (FSCA), the organisation tasked by the government with enhancing the integrity of financial markets in SA, has published a new standard for banks which aims to ensure banks conduct themselves fairly.
The authority also aims to enhance the efficiency and integrity of financial markets; promote fair customer treatment by financial institutions; provide financial education and promote financial literacy; and assist in maintaining financial stability.
Banks are already subject to a dizzying array of regulations governing how they serve consumers, outside the prudential requirements which monitor risk-taking, capital levels and liquidity. These include the Financial Intelligence Centre Act and anti-money laundering regulation, the National Credit Act and the Consumer Protection Act. There is also the banking ombudsman tasked with refereeing disputes between clients and institutions.
The new standard aims to address everything from the unethical treatment of customers to the proactive intervention in the design of products.
“The issue of market conduct looks beyond complaints, the new regulation introduces critical guiding principles. We also know that prevention is better than cure, so we want to be forward looking in terms of coming up with different approaches before they are implemented,” says Kedibone Dikokwe, divisional executive for conduct of banks at the FSCA.
The new standard flows from the enactment of the Financial Sector Regulation Act (FSRA), which was introduced in 2018, and has as its central purpose the fair treatment of customers.
“A large part of the new market conduct standards will be ensuring products perform in the way they are represented and ensuring that customers can understand what the banks are marketing to them,” says Sindiswa Makhubalo, head of the bank and payment providers at the FSCA.
The standards have been codified into six outcomes for the bank-client relationship. These include aspirations such as ensuring the banks treat customers fairly and ensuring customers are provided with clear (non-jargon and legal filled) information before, during and after point of sale.
Other outcomes include full disclosure about the complexity of a product, and holding banks accountable so that products “perform as promised”. The standard becomes effective immediately but does allow for a transition of eight to 12 months for products if required.
The FSCA says it wants to “proactively engage” with the industry to establish benchmarks regarding customer engagement standards.
Thematic reviews will also be undertaken, where the FSCA will inform its engagement with the banks from trends seen in market, such as those relating to complaints, says Makhubalo.
When it comes to complaints, the Banking Ombudsman should be approached first and then the FSCA will look into the matter, says Dikokwe.
Makhubalo and Dikokwe acknowledged that heightened levels of competition in the industry — as seen by the arrival of banks such as TymeBank, Discovery Bank and the soon-to-be-launched Bank Zero — will also play a key role in ensuring fair treatment of clients.
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