Fair Treatment of Financial Consumers

A resilient and progressive financial system is characterised by the presence of financial service providers (FSPs) that are responsive to the needs of financial consumers, and that conduct their businesses in a way which engenders trust and confidence. A FSP with a corporate culture that focuses on the fair treatment of financial consumers (FTFC) is more likely to have high customer satisfaction and retention, leading to sustained business performance over the long term.

It is crucial that the management of conduct risk1 is incorporated as part of the FSP’s overall risk management framework, which shall be subject to the same processes as other risks, including risk assessment, risk management, risk monitoring and reporting.
The risk assessment process shall identify areas that could potentially result in conduct risk, including business models, product development and governance, sales and marketing practices and staff remuneration practices.

A FSP must be fair, responsible and professional when dealing with financial consumers, and financial consumers may become vulnerable at a certain period in their lives or at different stages in the product life cycle, as their circumstances may change over time due to a change in health conditions, employment status, life events or other factors which can increase susceptibility to financial distress, where poor treatment of financial consumers not only gives rise to conduct and reputational risks for a FSP but may also result in significant costs due to remediation, compensation and penalties.

Financial consumers who are or become vulnerable in particular stages of their lifecycle are more likely to have additional or distinct needs which, if not reasonably met by FSPs, could result in unfair treatment, undue financial hardship or exclusion from essential financial services, and these vulnerable consumers may be significantly less able to make informed decisions in their best interests when dealing with FSPs and are more likely to experience harm when dealing with FSPs or their intermediaries, compared to the average financial consumer.

A FSP that makes the effort to understand and effectively respond to the needs of vulnerable consumers can benefit from increased levels of customer satisfaction that leads to improved customer loyalty, and conversely, a FSP that consistently fails to consider the needs of vulnerable consumers may lose competitiveness over time as financial consumers opt to deal with FSPs which are observed to be more ethical and socially responsible in the treatment of their customers.

This Policy Document aims to—
(a) foster high standards of responsible and professional conduct in a FSP;
(b) promote a culture where the interests of financial consumers are an integral part of a FSP’s business strategies and operations;
(c) set expectations for a FSP to effectively manage conduct risk;
(d) provide financial consumers with the confidence that a FSP exercises due care, skill and diligence, and acts fairly in its dealings with financial consumers;
(e) promote a culture where a FSP considers and responds to the interests and needs of vulnerable consumers appropriately in conducting their business and operations;
(f) set requirements and clear guidance for a FSP to observe and provide the appropriate support to vulnerable consumers, consistent with fair treatment of financial consumer outcomes.

This document belongs to Bank Negara Malaysia (BNM). Full access to the original source is available here: https://www.bnm.gov.my/banking-islamic-banking