Thursday, December 12, 2024

Commerce Commission to review banking sector competition

Cabinet has today agreed to allow the Commerce Commission to conduct a market study into banking sector competition for personal banking services to ensure the market is working well for New Zealanders.

Finance Minister, Grant Robertson said Kiwis need to know they can trust their bank with their finances.

“The cost-of-living is top of mind for many Kiwis and we need to ensure there’s a competitive market among banks providing personal loans, mortgages, credit cards and other banking services so that people have confidence they are getting the best deal possible when doing their banking,” said Mr Robertson.

“There have been long standing concerns that the market is not working well for New Zealanders. Banks have consistently made high profits over a number of years and their returns have outperformed their peers in other countries.

“New Zealand’s banking sector is dominated by a small number of big players. Four major banks make up around 85% of the mortgage and other lending market, and hold a 90% share of total bank deposits. Loans by smaller lenders are growing but remain small in comparison.”

The Minister said there had not been an in-depth look into competition issues in New Zealand’s banking for some time, with the nation lagging behind other countries such as Australia and the UK into performing a detailed analysis of banking services.

“I want to be clear this study is not about bank conduct and culture. The Financial Markets Authority and Reserve Bank carried out an investigation in 2018 into this issue which has already resulted in a number of measures to protect consumers,” Mr Robertson said.

The market study is the first step in understanding banking competition issues, Commerce and Consumer Minister, Duncan Webb said.

“The Commerce Commission will focus on examining barriers to new competitors entering or expanding in the market, the introduction of innovative products and services and consumers’ ability to switch between banks,” he said.

“As part of the study, the Commission will examine banks’ profitability and other financial measures to assess competition in the sector.”

The study will be completed by the end of August 2024 and will determine any actions needed to make sure competition is working for bank customers.

“In the interim, the Commission is expected to release a preliminary issues paper in August this year. I expect this paper will describe the structure of the industry and provide early indications on the nature of competition. It will set a clear signal of direction for the study and may uncover discrete issues which the Government could take steps to resolve, ahead of the final report,” said Minister Webb.

“Separately, we are getting on with our work on open banking and establishing a consumer data rights regime by releasing a draft Bill for consultation this week.”

He said open banking will put consumers in the driver’s seat on how their data is used and shared.

“While consumers already share their data, this will allow people to do so in a safe and secure manner between trusted providers.”

“This will set rules and regulations for providers to follow in handling and securing consumer data and make the sharing of that data safer, faster and easier,” said Dr Webb.

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