Bank of New Zealand (BNZ) has been fined NZ$2.6 million after a long-running interest calculation failure left thousands of non-profit account customers receiving less interest than they were told to expect.
The penalty follows action by New Zealandâs Financial Markets Authority (FMA), which found that BNZâs customer communications did not accurately reflect how interest was calculated on certain accounts. The issue affected 23,103 customers between December 2014 and February 2024 and led to NZ$5.39 million in underpaid interest.
BNZ later self-reported the matter to the regulator and paid NZ$5.44 million to affected customers, including the correct interest and compensation for the time customers were without those funds.
A Small Calculation Difference With a Big Financial Impact
At the centre of the case was the way interest was calculated on certain non-profit accounts. Customers were told interest would be calculated daily, which generally means balances are assessed each day before interest is credited.
BNZ instead used the lowest monthly balance to calculate interest. For customers whose balances changed during the month, that method could reduce the amount of interest paid compared with a true daily calculation approach.
When applied across more than 23,000 customers over nearly a decade, the difference became significant. The underpayment reached NZ$5.39 million before the issue was corrected.
Why Regulators Took Action
The FMA said the conduct breached fair dealing rules because BNZâs account terms and customer communications were inconsistent with how the products worked in practice.
FMA Head of Enforcement Margot Gatland said financial institutions must ensure their terms and customer communications are accurate and reflect how products operate. In BNZâs case, the regulator said the bankâs representations about interest calculations did not match the actual approach used, causing customer harm.
The case highlights a broader challenge facing banks worldwide. As institutions manage large numbers of products across legacy systems, even routine account processes can create compliance risks if documentation, technology, and customer communications fall out of alignment. Similar risks have appeared in banking technology failures, where operational issues can quickly affect customer trust.
BNZ Repaid Customers and Changed the Accounts
BNZ cooperated with the FMA and took several steps to fix the issue. The bank repaid affected customers the correct interest and added compensation for the use of their money, bringing total remediation to NZ$5.44 million.
BNZ also updated its terms, stopped offering the affected accounts in February 2025, and moved customers to new products.
Although the bank self-reported the issue and compensated customers, the scale, duration, and customer impact of the failure resulted in the NZ$2.6 million fine.
What Customers and Non-Profits Should Learn
The BNZ case shows why interest calculation methods matter. The advertised rate is important, but the balance used to calculate interest, the calculation period, and the payment method can all affect the final amount received.
For charities, clubs, trusts, community organisations, and other non-profit customers, these details can influence budgeting and financial planning, especially when account balances move during the month.
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The case also sends a clear message to banks: older products and legacy systems need regular checks. If a product is described one way but operates another way, customer remediation may not be enough to avoid regulatory penalties.
More information about financial conduct obligations and fair dealing requirements is available from the Financial Markets Authority.
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