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6 ways SA banks have to treat customers differently by May 2017

| Legislation

Management consulting firm, Consulta, has released its latest South African Customer Satisfaction Index (SAcsi) for the local banking industry – including a measurement as to how well South African banks comply with the incoming Treating Customer Fairly (TCF) code.

As of 1 May 2017, the TCF is a regulatory framework is set to improve market conduct in financial services by governing the way a Financial Service Provider (FSP) conducts daily dealings with its clients, ensuring that all clients are treated fairly.

As the new codes will be primarily consumer-facing, banks will now also be financially liable for not meeting these standards, noted Consulta CEO Professor Adré Schreuder.

“The cost of non-compliance in countries where the TCF framework has already been adopted has increased substantially in recent years. This is likely to continue, as the new codes are introduced to the local market.”

This was echoed by associate director of market conduct at KPMG, Finn Elliot who believed that the new legislation was single most significant financial sector regulatory reform that South Africa has ever experienced.

“The FSCA is going to want to see and understand institutions’ governance structures, risk controls, corporate culture and their business practices – institutions will need to objectively demonstrate to the FSCA how they are ensuring the fair treatment of customers,” said Finn.

New rules

Market conduct refers to the prices and other market policies pursued by banks in terms of both their aims and the way in which they coordinate these decisions.

The new rules that FSPs will now have to follow as highlighted by Finn include:

1. Institutions are required to perform an assessment of their business model and strategy with the aim of identifying and assess “conduct risks” prevalent in their business.

2. Institutions are required to implement the necessary governance structures, policies, processes and procedures to be able to manage, monitor and control conduct risks.

3. A market conduct risk framework should be established, within which the governance structures and policies will operate.

4. All management and staff must understand and appreciate what market conduct is, the basis or rationale for it, and support the need for its introduction into the business.


The TCF outcomes are defined by the FSB as follows:

1. “Customers must feel confident that they are dealing with an institution where TCF is at the core of their culture.”

2. “Products and services in the retail market which are sold and marketed are designed according to the needs of the customers identified and targeted accordingly.”

3. “Customers are provided with clear information and kept appropriately informed before, during and after point of sale.”

4. “Advice is suitable and according to the customer’s circumstances.”

5. “Service is of an acceptable standard and products perform as customers have been led to expect.”

6. “Customers do not face unreasonable post-sale barriers when they want to change a product, switch providers, submit a claim or make a complaint.”

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