The Financial Consumer Agency of Canada (FCAC) has published a report saying bank cultures strongly anchored in sales can increase the risks of mis-selling to consumers and of bank employees breaching market conduct obligations.

The report, the Domestic Bank Retail Sales Practices Review, follows a 9-month review of the domestic banks’ sales practices.

"Banks are in the business of making money. We know that," says Lucie Tedesco, commissioner, FCAC in a March 20 announcement. "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."

Focused on selling products and services

The report says that retail banking culture is predominantly focused on selling products and services, increasing the risk that consumers' interests are not always given the appropriate priority.

In addition, it says the banks' financial and non-financial incentives, sales targets and scorecards may increase the risk of mis-selling and breaches of market conduct obligations.

Controls are underdeveloped

FCAC also found that “controls to mitigate the risks associated with sales practices are underdeveloped” and the report proposes measures to reduce risks.

FCAC says it will reinforce its supervisory and enforcement teams “and implement a modernized supervision approach that will allow it to monitor banks more proactively.”

The agency added that it is currently investigating alleged breaches of market conduct obligations that may have been identified during its review.

No widespread mis-selling

In response to FCAC's report, the Canadian Bankers Association underlined that there is no widespread mis-selling and that banks provide consumers with successful transactions the vast majority of the time. 

"Canada's banks are client-focused with a deep commitment to high ethical standards and complying with the law when providing products and services to help customers meet their financial goals," says Neil Parmenter, president and CEO, Canadian Bankers Association. "The six largest banks in Canada cooperated fully with FCAC and we are encouraged that the Review found no widespread mis-selling and that banks get this right the vast majority of the time."

To learn more, consult FCAC’s Domestic Bank Retail Sales Practices Review report, on the Government of Canada’s website.