New Zealand’s financial services sector entered a new era in March 2025 with the full rollout of the Conduct of Financial Institutions regime, known as CoFI, sparking ongoing refinements in 2026. These updates balance consumer protection with practical compliance, reshaping how banks, insurers, and lenders interact with everyday Kiwis.
Core of the CoFI Regime
The Financial Markets (Conduct of Institutions) Amendment Act 2022 anchors CoFI, mandating that financial institutions treat consumers fairly across all dealings. Banks, insurers, and non-bank deposit takers must secure licenses from the Financial Markets Authority, proving they prioritize client interests over sales pressures. Fair conduct programmes form the backbone, embedding ethical practices into product design, sales, and ongoing service.
Licensing opened in mid-2023, with full enforcement by March 31, 2025. Institutions now publish these programmes online, outlining governance, monitoring, and remediation for poor outcomes. The fair conduct principle demands proactive fairness, not just avoiding harm, covering everything from loan approvals to insurance claims.
Key Updates in 2026
Government reviews in 2024 led to 2026 tweaks, softening some minimum requirements for fair conduct programmes while retaining core protections. A draft amendment bill introduces flexibility, letting firms tailor programmes to their scale and risks rather than rigid checklists. This responds to industry feedback on high compliance costs, estimated in the tens of millions annually for larger players.
Incentives rules stay firm, banning volume-based bonuses like leaderboards or overseas trips that push product sales over suitability. Intermediaries, including brokers, face the same curbs. A new duty to provide services—unless legally barred or for sound commercial reasons—aims to end blanket refusals, ensuring access for underserved groups like rural borrowers.
The Financial Markets Authority ramps up supervision in 2026, issuing guidance on programme effectiveness and launching targeted audits.
Implications for Financial Firms
Firms navigate a landscape of accountability and opportunity, with licensing as the entry gate.
| Requirement | Details for Firms | Compliance Tips |
|---|---|---|
| Licensing | FMA approval for general conduct | Submit by deadlines; budget fees |
| Fair Conduct Programme | Published, board-approved framework | Customize post-2026 flex rules |
| Incentives Ban | No volume/value targets | Shift to holistic staff rewards |
| Consumer Duty | Provide services unless exceptions | Document refusals clearly |
| Monitoring and Reporting | Track outcomes, remediate issues | Use data analytics for insights |
This table outlines essentials, helping firms prioritize amid evolving rules.
Smaller non-banks gain breathing room with scaled obligations, while giants like major banks invest in tech for real-time fairness checks. Breaches risk fines up to ten million dollars or license revocation, pushing cultural shifts toward client-centric models. Early adopters report streamlined operations, as robust programmes cut disputes by embedding trust upfront.
What Consumers Gain from These Changes
Kiwis benefit from heightened protections without the red tape overload. Fair treatment means clearer communications—no fine print traps—and products suited to needs, like affordable home loans for first buyers. If a bank denies service, firms must explain valid reasons, curbing discrimination.
Incentives curbs reduce mis-selling, as advisers prioritize fit over quotas. Published programmes let shoppers compare providers, spotlighting ethical leaders. Remediation kicks in faster for errors, with automatic refunds or adjustments. Vulnerable groups—Māori, Pasifika, elderly—see targeted safeguards, aligning with Treaty principles.
Real-world wins include faster insurance payouts and transparent fee structures, saving households hundreds yearly.
Enforcement and the FMA’s Role
The FMA wields broad powers, from licences to penalties, focusing on outcomes over paperwork. In 2026, expect enforcement notices and public censures for laggards, alongside safe harbour guidance for compliant firms. Annual reporting mandates transparency, with dashboards tracking sector performance.
Collaboration grows: FMA hosts workshops, while the Code Committee refines standards. Cross-agency ties with the Commerce Commission tackle overlaps, streamlining oversight.
Challenges and Criticisms
Fairness remains subjective—one person’s equitable deal feels unfair to another—sparking debates on overreach. Firms lament costs diverting from innovation, with smaller players consolidation risks. Consumers worry tweaks dilute protections, though core duties endure.
Global alignment lags: Australia’s breach reporting outpaces New Zealand’s, prompting calls for harmonization. Tech gaps hinder monitoring, as legacy systems struggle with data demands.
Sector-Wide Shifts and Best Practices
Banks lead with AI-driven fairness tools, flagging biased lending algorithms. Insurers overhaul claims processes, cutting denial rates through empathetic training. Non-banks like finance companies adopt modular programmes, scaling as they grow.
Best practices emerge:
- Board ownership: CEOs champion culture.
- Customer voice: Panels test products pre-launch.
- Tech integration: Analytics spot patterns early.
- Training: All staff grasp fair conduct.
Insurers and lenders weave CoFI into strategy, viewing compliance as competitive edge.
Broader Economic Ripple Effects
Stronger conduct fosters trust, boosting financial inclusion and savings rates. Reduced mis-selling trims remediation costs, freeing capital for lending—potentially one billion dollars more annually. Māori economic empowerment grows via equitable access, supporting wealth-building.
Productivity rises as firms ditch wasteful incentives, redirecting to digital services. International investors eye stable regulation, drawing capital to fintechs.
Future Directions Beyond 2026
Ongoing reviews signal evolution: credit contracts tie into CoFI, expanding scope. Digital wallets and crypto may fall under fair conduct, adapting to innovation. Public consultations shape refinements, ensuring relevance.
A national financial literacy push complements rules, empowering consumers to demand fairness.
Practical Steps for Firms and Consumers
Firms: Audit programmes against new flex rules, train staff, and benchmark peers. Engage FMA early for feedback.
Consumers: Review provider programmes online, ask about incentives, and report issues via dedicated portals. Shop armed with comparisons.
Lance Evans is a contributor at CSKHYBER.co.nz covering New Zealand and Australia news, with a focus on trending updates and public-interest stories.