NOMPU SIZIBA: The Financial Sector Conduct Authority has published a new conduct standard for banks. This stems from the Financial Sector Regulation Act, which was introduced in 2018 and serves as a first step in the regulator rolling out a comprehensive market-conduct regulatory framework for the banking sector.
To tell us more about it, I’m joined on the line by Sindiswa Makhubalo. She’s the head of Banks and Payment Providers Supervision at the FSCA. Thank you so much for joining us, Sindiswa. The Financial Sector Regulation Act gives you guys the mandate to keep tabs on the conduct of banks. So tell us a bit more about the documents that you released today [July 8, 2020], and ultimately where it’s all headed, since you indicate that it is the first step.
SINDISIWA MAKHUBALO: Thank you, Nompu, and a very good evening to all the listeners today. It’s certainly quite an exciting day for the regulatory community; but, not only that, for the banking sector as well as the consumer, the clients. I think this is a huge milestone that has [been achieved] today [July 8, 2020]. The Financial Sector Conduct Authority, Nompu, today released or launched the Banking Conduct Standards.
NOMPU SIZIBA: Yes.
SINDISIWA MAKHUBALO: This is a new regulation that requires all banking institutions to comply with the promotion of the fair treatment of customers. What the standard will help us with is that it will assist us, as the FCSA, to monitor the conduct of banks by ensuring that their customers are central to the development of product, and to the provision of services. Obviously, as I indicated, this is a first step to what we call the Conduct of Financial Institutions Bill, which we are working on at this present moment.
NOMPU SIZIBA: Right. So, what are we talking about when we refer to bank conduct – how in practice are you going to keep tabs on that, because obviously you have to set the standards for the banks. So how are you going to police that?
SINDISIWA MAKHUBALO: Thanks for that question. The first part of it is what we refer to when we talk about bank conduct. Bank conduct is quite broad. It looks at the actual behaviour of the bank. That’s really from the top. The leadership of the bank has to model the bank conduct that we’re talking about. It refers to issues of culture, because what we realised with this is that there’s going to be a need for a total fundamental shift on the culture stuff. Culture plays a huge part in terms of ensuring that the bank behaviours are correct. It starts with how they develop the product, for example, because if they develop the product now, it is no longer about what profit we are going to make from this product, but rather more about whether it’s suitable for the customer. Is it right for the customer, does it meet the needs of the customer, and so forth? So it’s very broad, very about the organisational culture, very much about the strategies that they develop……
NOMPU SIZIBA: Yeah.
SINDISIWA MAKHUBALO: So customer centricity is really going to be heightened, and very much on the basis of the introduction of the banking conduct standards.
NOMPU SIZIBA: So when you reflect on how the banking sector has performed in treating customers fairly in previous times, what has that looked like? Obviously there’s a reason why you’ve had to introduce these conduct standards.
SINDISIWA MAKHUBALO: If I look back, Nompu, obviously there have been gaps, there have been deficiencies. They’re not really from what we see and experience as consumers of the service that the banks provide. But there’s some research that was done that really highlighted some of these gaps and some of these deficiencies, undesirable practices at some banks. And it really calls for us to do something about it in terms of ensuring that we look after the customer’s interests at some point. So there have been customers who have been great, and have not taken the customer’s interest to heart.
NOMPU SIZIBA: Ultimately you’re trying to look out for the consumer. What sort of impact are you hoping that these standards will have for banking consumers? And can they file a complaint with you guys if they’re dissatisfied that these conduct standards are not being upheld?
SINDISIWA MAKHUBALO: The benefit it adds to the customer, Nompu, is huge. In the past, both here in South Africa and even across the globe, we’ve seen customers’ trust in banks being eroded over time. But what this now does, the conduct standards really give the customers a voice, first of all; they empower the customers to [question] them and start challenging some of the conduct of banks that appears to be wrong, with no fear of being victimised.
So it gives the customers the right to be treated fairly by banks, and also to ensure that [the customers] can hold the bank accountable for its actions. And banks can actually deliver on the promises that they’ve made about their product.
If I look at the complaint focus, Nompu, obviously the customer will start looking at how they’re been dealt with and maybe they will start making complaints. What we are looking the customers to do, is to first raise their concern with the bank [itself]. Let the bank invoke all the internal avenues to try and address that complaint. If that does not work, the banking ombudsman will try to engage the bank to make sure that this is very much available and visual for customers to see, on all their touchpoints, that there is a banking ombud that is ready to receive and attend to this complaint.
We are also very open. If the customer still feels aggrieved, unhappy, or still dissatisfied, they can approach us so that we can look into it. And some of the few complaints, those exceptional cases that have come to us, have highlighted some broader industry challenges that we face – for example, the issue of fraudulent debit orders. The customer now even has to pay the fees for the fraudulent debit orders.
NOMPU SIZIBA: Thanks to was Sindiswa Makhubalo, Head of Banks and Payment Providers Supervision at the FCSA.