Finance Minister, Nicola Willis says the Government will act on all 14 recommendations made by the Commerce Commission’s final report into bank competition.
The Minister said the Commission has proven what had been long-suspected – New Zealand’s banking sector is uncompetitive, and Kiwis are not being well served by a highly profitable, two-tier oligopoly.
“Today’s report calls-out the market behaviour of New Zealand’s big four banks: they are highly profitable compared with international peers, they lack innovation and do not aggressively compete for customers,” Ms Willis says.
“Instead, ‘competition’ between them resembles a cosy pillow fight, with profit margins coming first and everyday Kiwis coming second.
“As a result, New Zealand bank customers are getting a raw deal: they face higher prices, fewer choices, and poorer service, even when compared to customers of the same parent banks in Australia.
“This is not good enough. Our Government will inject some genuine competition into the market for the benefit of all New Zealanders, and will respond with urgency to all 14 of the report’s recommendations.”
Minister Willis said she shares the Commerce Commission’s vision for a “stronger, more disruptive Kiwibank”.
“I want it to have the growth capital it needs to become a ‘maverick’ that exerts real competitive pressure on the big four.”
“I have asked Treasury to engage with Kiwibank’s parent company Kiwi Group Capital on options for raising new capital, including from KiwiSaver funds, New Zealand investment funds and investment from everyday New Zealanders. I will take proposals to Cabinet no later than December this year.”
Another set of recommendations relates to the policies and decisions of the Reserve Bank. The report concludes that the Reserve Bank can and should place greater emphasis on competition.
“I agree and I intend to issue a new Financial Policy Remit this year to make clear the Government’s expectation that the Reserve Bank, in its policies and actions, supports a more competitive banking sector,” said Ms Willis.
“International experience shows that competition is one of the most important drivers of long-term growth and productivity. Tuning-up competition in the banking sector will therefore play vital part of the Government’s plans to rebuild the economy.”
Commerce and Consumer Affairs Minister, Andrew Bayly says the Government accepts the challenge laid out to it and “has wasted no time”.
“We have already scrapped the overly prescriptive affordability regulations in the Credit Contracts and Consumer Finance Act, so Kiwis will benefit from easier and faster loan processing,” Mr Bayly says.
“We are implementing ‘open banking’ and are on track to meet the timeline the Commission has recommended.
“Open banking will make it easier for Kiwis to find services tailored to their needs, creating room for innovative, start-ups to challenge the big established banks.
“We agree with the Commission that open banking has the greatest potential to promote ongoing disruptive competition in the medium to long-term and are committed to facilitating its uptake as quickly as possible,” he said.
