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Financial watchdog says controls to mitigate sales risk at banks 'insufficient'

Financial watchdog says controls to mitigate sales risk at banks 'insufficient'
From CBC - March 20, 2018

Canada's financial consumer watchdog says there are "insufficient" controls in place at the country's biggest banks to prevent sales of financial products that are misrepresented or unsuitable for consumers, and the banks' sales-focused culture elevates the risk that employees may flout consumer protection rules.

The Financial Consumer Agency of Canada (FCAC) released the findings Tuesday after completing a review of business practices across Canada's Big Six banks following media reports last year alleging questionable sales tactics, such as selling services without the consent of customers.

The FCAC added it is investigating alleged breaches of rules of conductdesigned to protect consumers, and which banks are required to followthat may have been identified during its review and will take action where appropriate.

"Banks are in the business of making money. We know that. But the way they sell financial products and manage employee performance, combined with how they set up their governance frameworks can lead to sales cultures that are not always aligned with consumers' interests," FCAC commissioner Lucie Tedesco said in a statement.

The review examined the Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada.

The FCAC said it did not find widespread misselling, defined as selling products that are unsuitable or where the consumer is provided with incomplete or misleading information, at the banks.

However, its concluded that retail banking culture is predominantly focused on selling and rewards employees for doing so and that increases the risk that client interests are not always given the appropriate priority.

The agency also said the controls these banks have in place to mitigate the risks of misselling are "insufficient" and "underdeveloped," particularly compared to the banks' robust corporate governance policies.

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