Neil Sands
A parliamentary inquiry has criticised the lack of competition in New Zealand’s banking sector, saying the “Big Four” Australian-owned banks reap higher profits than their international peers and recommending lower barriers for new entrants.
The Finance & Expenditure Select Committee inquiry into banking competition also called for the Reserve Bank to adopt “market efficiency” as one of its key objectives after hearing evidence that it is too focused on financial stability.
However, the inquiry’s final report concedes that its findings on the state of the sector largely mirror those of the Commerce Commission’s report into personal banking released last year.
“We know that our summary of some of the key issues will not be new information to the finance sector,” it says of the inquiry, which took a year and gathered evidence from bank executives, reform activists and economists.
“Our recommendations are also unlikely to be a silver bullet for competition, and it now falls to the various government agencies to determine how to implement and respond to our recommendations.”
The inquiry, established as part of the coalition agreement between National and New Zealand First, examined issues including profitability, barriers to entry and regulatory impacts.
Its report makes 19 recommendations, although some are already being acted upon, including added investment in Kiwibank to strengthen its role as a “challenger” bank and reviewing the Reserve Bank’s capital requirements.
Others are highly technical, including broadening a “regulatory sandbox” trial currently underway at the Financial Markets Authority, and eliminating duplication among members of the Council of Financial Regulators.
The government has 60 working days to respond to the recommendations.
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