Review of retail sales practices at Canada’s big six banks

Canadian banks and foreign operations of federally regulated banks in Canada are subject to federal consumer protection legislation overseen by the Financial Consumer Agency of Canada (FCAC). The FCAC completed a review of retail sales practices at Canada’s big six banks. The summary findings were released on Tuesday March 20, 2018. The review called for stronger governance and oversight but did not find widespread “mis-selling”. The FCAC review resulted in five key findings:

  1. Retail banking culture is predominantly focused on selling products and services, increasing the risk that consumers’ interests are not always given the appropriate priority.
  2. Performance management programs—including financial and non-financial incentives, sales targets and scorecards—may increase the risk of mis-selling and breaching market conduct obligations.
  3. Certain products, business practices and distribution channels present higher sales practices risk.
  4. Governance frameworks do not manage sales practices risk effectively.
  5. Controls to mitigate the risks associated with sales practices are underdeveloped.

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Heightened Risk Requirements: OCC Defines “Strong,” Now Banks Must Get There

On September 2, 2014, the Office of the Comptroller of the Currency (OCC) finalized new standards that formalize “heightened expectations” for risk governance on the banks over $50 billion it regulates — and in turn, impose new levels of responsibility on the board and executive leaderships of those institutions for the risk decisions they make.

Now, banks must codify “strong risk management practices” at the bank legal entity level, including governance policies, procedures, structures and even board composition. What some banks have had to do as the result of individually targeted Matters Requiring Attention (MRAs) is now applicable to all, albeit on a phased basis according to size. All banks with more than $50 billion in assets must comply with the new rules within 18 months. Those whose assets total between $100 billion and $750 billion have six months and those with more than $750 billion must comply within two.

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