Banking institutions must conduct customer-first business operations

The Yomiuri ShimbunDo financial institutions give top priority to benefiting customers? A recent compilation of recommendations by a government panel must serve as an opportunity to reexamine how their business operations should be.

The expert panel of the Financial Services Agency has compiled principles concerning customer-first business management that should be referred to as norms by banking institutions.

The recommendations call for improving banking services to promote a move from saving to investment. The agency will adopt the recommended principles this spring and urge banks to comply with them through inspection and supervision of their operations.

The principles call for banking institutions, when promoting and selling financial products, to “conduct business sincerely and fairly for the best interests of customers.”

The panel also recommended that financial institutions “should work toward making customer-first business management part of their corporate culture.”

These recommendations represent what should be followed by all businesses, not just by banking institutions alone.

These institutions would frequently ask customers to buy replacement investment trusts, for which high handling fees are charged, and sell complicated and high-risk financial products to elderly people with a lack of financial knowledge. Many people point out that such business practices, in which customers are treated lightly, have always been rampant.

The principles call for financial institutions to provide customers with important information, including the reasons for charging fees and the risks of losing money, in an understandable and comprehensible manner.

When soliciting the elderly and others who tend to be vulnerable, the panel recommended that screenings be particularly meticulous.

Comply with principles

It is essential for banks to steadily comply with these principles in conducting business so that the panel’s recommendations will not end up as pie in the sky.

When banks and securities firms sell investment trusts, they are said to often recommend products of their group companies first. They should also provide proper information concerning competitive products of other companies, in a bid to sell products that can meet the needs of customers.

Legal arrangements have repeatedly been made to enhance understanding of financial products and protect the interests of customers.

But the banking industry persists in the formalist belief that everything is all right if they just honor the rules at a minimum level, as well as the herd mentality of going along with other firms in the same industry in working out response measure. Fruitful improvement measures have undeniably fallen behind.

The Financial Services Agency will monitor whether banking institutions provide products with a customer-first attitude, in compliance with the principles. To enhance the effectiveness of recommended improvement measures, financial authorities and institutions must hold detailed talks.

In the first place, banking institutions must strive to work for the interests of customers on their own initiative, without being urged to do so by the panel’s recommendations. It is also essential for them to constantly check whether their business operations are correct.

The important thing is to permeate and firmly entrench a customer-first corporate culture in financial institutions involving all levels, from top management to employees working on the front line.

It is also imperative to accelerate the introduction of a pay system under which employees are rewarded for conducting business operations for the benefit of customers.

(From The Yomiuri Shimbun, Jan. 9, 2017)Speech


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