CoFI licensing confirmed in the interim, so financial institutions should press on

05 February 2024

Minister of Commerce and Consumer Affairs, Andrew Bayly, has confirmed that financial institutions (FIs) should continue working towards compliance with the existing Conduct of Financial Institutions (CoFI) licensing requirements, which will still commence on 31 March 2025.


Minister Bayly has provided a much-anticipated update on the new coalition government’s plans for CoFI licensing.

Most notably, the Minister has now confirmed that CoFI licensing requirements will be retained, and then later consolidated (with CoFI licences grandfathered), rather than repealed as previously indicated in August 2023.

In addition to the announcements on CoFI, the Minister also announced proposals for:

  • a more defined ‘twin peaks’ regulatory model, with FMA alone acting as conduct regulator and the RBNZ acting as prudential regulator. This will include moving monitoring of conduct in respect of the Credit Contracts and Consumer Finance Act (CCCFA) away from the Commerce Commission to the FMA;
  • a simplification and rationalisation of licensing requirements generally, with financial institutions requiring a single prudential licence from the RBNZ and a single conduct licence from the FMA.
  • review and reform of the CCCFA and Companies Act.

What does this mean for financial institutions?

While the Minister expressed concern about the rising compliance costs for financial institutions, he was clear: financial institutions need to continue with their preparation of fair conduct programmes (FCPs) and compliance with CoFI.

However, reassurance has been given that CoFI will be implemented in a way that ensures that fair conduct programmes are proportionate and fit-for-purpose, via FMA guidance.

The existing CoFI licence requirements will be grandfathered into any future licence changes and appropriate timelines and transitional arrangements will be implemented to reduce uncertainty.

Samantha Barrass, Chief Executive of the Financial Markets Authority (FMA) echoed the Minister’s sentiments. Ms Barrass emphasised that the FMA will not be taking a one-size-fits-all view of FCPs, nor will it be heavily scrutinising or signing off FCPs. The boards of financial institutions are best placed to be, and will be, responsible for their FCPs. Ms Barrass noted that this is particularly the case for smaller firms, who can expect extra guidance on how to meet minimum conduct requirements (the unspoken message being that larger firms may expect their FCPs to receive greater scrutiny than their smaller counterparts).

Our view: Next steps

This messaging may be welcomed by those industry members who had already made significant progress on their CoFI licensing arrangements, and should reignite any who had slowed work programmes in reliance on the National party’s pre-election announcements in favour of CoFI’s repeal.

The announcement clears the way for industry members to prepare in earnest for their CoFI compliance.

Financial institutions should continue work towards identifying, monitoring and managing conduct risk. This should include undertaking a review of existing policies, processes, systems and controls in place aimed at ensuring compliance with the fair conduct principle and identifying any gaps and areas for improvement. For larger institutions with complex operations, this is likely to include the development of an overarching FCP framework document explaining how their combined policies, processes, systems and controls combine to ensure fair outcomes for customers.

Our financial services experts have experience working with all types of financial institutions on their CoFI compliance, including developing appropriate and proportionate FCPs, making licence applications and reviewing/developing business policies, processes, systems and controls.

Related insights

See all insights