Any registered bank, licensed insurer, or licensed non-bank deposit taker in the business of providing one or more relevant services will need to hold a financial institution licence to continue operating, if that service is received by a consumer in New Zealand.
SBS Bank who were one of the first organisations to be granted their Financial Institution licence, Rowena Thompson, Group Chief Risk Officer, talked to FMA's Anita Frazer about the bank's experience and their licensing journey.
Rowena, it's a busy time for the financial markets sector with many competing priorities. What motivated SBS to get their application done in such a timely way?
As a smaller sized organisation with finite resource, it was important for us to front-foot the Licensing process to ensure that we could focus on successfully implementing our Fair Conduct Programme by 31 March 2025. We were aware of discussions that signalled there might be some changes, but we didn't want to go off course and we kept going. SBS saw it as an important priority.
How long did it take you and your team to get ready for submitting your application? What did you need to do before hitting the submit button?
Our Financial Institution licence was submitted in March 2024, a year ahead of schedule. To deliver our fair conduct programme by 31 March 2025, we wanted to have confidence that it would be ingrained in all that we do. We did around 18 months of work before we felt ready to apply for our licence. This included:
- General Conduct Risk management uplift - continued momentum from the Bank Conduct Review of 2018
- A full gap analysis with various business units across the Bank that are impacted by, or help us meet the incoming CoFI obligations - internal stakeholder engagement and buy-in was crucial for this process
Preparing an initial Fair Conduct Programme
- Education and regular engagement with our Board
- Documenting the actions and improvements we needed to implement across the business to deliver an effective Fair Conduct Programme by 31 March 2025, so it became business as usual for us.
Did you experience any unexpected hurdles along the way - do you have any pointers for other entities getting ready to apply?
Our CoFI project team was a small team, but it became apparent early on that we would not be able to implement an effective Fair Conduct Programme and meet the CoFI obligations (including for vulnerable customers and intermediated distribution) without the support of additional team members across the Bank.
Internal stakeholder engagement and buy-in was crucial for the gap analysis process. This included establishing the benefits each business area would get from implementing improvements across the business. Our team members have been amazing at embracing the incoming changes and actively participating to deliver improvements in their business areas.
Management and the Board have been involved throughout the Licensing process, so we feel we have a programme that is proportionate and tailored for SBS Bank.
Throughout the process we asked ourselves how we knew our approach was the right one, but we grew in confidence and pulled together as a team. We realised that our systems and processes were already place, and CoFI is simply integrating with what we already have. We agreed that this just ties the existing threads together.
What support did you receive along the way? Did you use any of the FMA's resources, talk with our staff or attend any of our webinars?
FMA guidance relating to the Fair Conduct Programme and Intermediated Distribution in particular was useful to confirm that what we had prepared and were working towards implementing was on the right track.
We had engagement meetings with the FMA throughout the licensing process. We attended online sessions, read the online material and engaged with the FMA team throughout the Licensing process. This helped us to define our parameters and in particular the rightsizing language really resonated with us.
What does it mean for SBS to have been granted the FI licence?
As a member-owned Bank, the fair conduct principle of treating consumers fairly aligns closely with our core purpose and values. We are extremely proud to have been granted our Financial Institution Licence well before the CoFI regime goes live. Having our Financial Institution License and an effective Fair Conduct Programme helps us further demonstrate our commitment to our members.
Our focus now is to successfully embed our Fair Conduct Programme before 31 March 2025. We see it as a living document. It is about our social licence as much as a regulatory licence to operate. We will enhance it, will test the controls that we have, and it will become best business practice.
The form - was it user friendly?
It was so similar to the FAP licence process. We found the application form easy to follow and when we had questions, we were able to check those to make sure our interpretation was correct. Pre-registering was a very simple process.
If you were to offer a key tip, what would it be?
It is really important to get support from your Board, so you have the priority set from the top of the organisation. You have to get the business engaged early to help build the improvements - that is how we got buy-in and momentum. It became a business-led initiative.
Ready to start your FI licence application journey?
Check out FMA's website for tips and tools to get you on your way.
*Opinions expressed in this article are those of the participant and not of the FMA.
