Canadian banks must strengthen governance and control frameworks over sales practices in order to reduce a growing misconduct risk from putting profits ahead of consumer protection. That is the finding of a recent consumer agency review, which focused heavily on banking culture. While the directive only applies to Canadian banks, the report could act as a tool for all banks on how they can mitigate the enforcement and reputational risks stemming from over-zealous sales practices.
The Financial Consumer Agency of Canada (FCAC) reported in late March that Canadian retail banking culture had become so sales-focused that existing governance frameworks and compliance controls were insufficient for mitigating conduct risk. “Governance frameworks and control mechanisms do not effectively manage or mitigate the risks inherent to cultures that are so heavily anchored in sales,” the FCAC Domestic Bank Retail Sales Practices Review concluded.