The banking sector: Kiwibank will play a role in keeping the bastards honest (or in making them more competitive)
Zeus Publications in 2005 published a book written by Stephanie Retchless, a former Australian bank manager, who recounted her experience in a job which, she claimed, was lacking in ethics and basic human decency. The book was titled Are All Banks B****ds?
The question was answered in the headline atop a Money Management article in more recent years. It insisted: All banks are b****ds.
Long before then, when the late Ron Clark was the editor, Rural News published an article under the heading ‘Why bankers are b****ds!’
Today we have learned how the government intends to curb the b****dry of the banks. It will act on all 14 recommendations made by the Commerce Commission in its just-released final report into bank competition.
The commission is recommending a raft of regulatory and structural changes to drive more competition for the benefit of Kiwi consumers after a 14-month market study found “a stable, highly profitable, two-tier oligopoly with no disruptive maverick and a lack of obvious or aggressive price competition”.
The state-owned b****d – sorry, bank – looks likely to play a big role in whatever is done to keep the other b****ds honest.
The Commerce Commission’s report has drawn attention to the potential of a stronger Kiwibank as a disruptor to the four major retail banks, and open banking as a “game-changer”, unlocking competition and revolutionising choice for Kiwi consumers.
Commission Chair John Small says further work and consultation since the release of the Commission’s Draft Report in March this year “has only served to reinforce our view that competition isn’t working as it should in this sector, and Kiwi consumers are missing out as a result”.
Dr Small says personal banking services are hugely important to New Zealanders and the broader economy – with almost every household having a bank account and debit card, nearly 60% having a credit card, and a residential mortgage market of around $340 billion.
“In a well-functioning market with strong competition, we’d expect to see more aggressive strategies to win customers from other banks.
“What we see in New Zealand is that the major banks have little strategic differentiation, and their growth targets focus on maintaining market share and protecting margins and profitability.”
Small says this means they avoid significant competitive responses, “resulting in limited investment in innovation, muted competition and some demographics being poorly served currently”.
Finance Minister Nicola Willis was prompt in declaring that she wants Kiwibank to have the growth capital it needs to become a ‘maverick’ that exerts real competitive pressure on the big four.”
The Reserve Bank will be called on to do its bit in fostering bank competition, too.
The ministerial commitments were made on the same day that Climate Change Minister Simon Watts announced the updating of settings for the New Zealand Emission Trading Scheme, an initiative intended to ensure New Zealand has a more credible market
And it followed news that the government is providing immediate relief to employers with upcoming seasonal peaks by creating a new subcategory of the Specific Purpose Work Visa.
Long before then, when the late Ron Clark was the editor, Rural News published an article under the heading ‘Why bankers are b****ds!’
Today we have learned how the government intends to curb the b****dry of the banks. It will act on all 14 recommendations made by the Commerce Commission in its just-released final report into bank competition.
The commission is recommending a raft of regulatory and structural changes to drive more competition for the benefit of Kiwi consumers after a 14-month market study found “a stable, highly profitable, two-tier oligopoly with no disruptive maverick and a lack of obvious or aggressive price competition”.
The state-owned b****d – sorry, bank – looks likely to play a big role in whatever is done to keep the other b****ds honest.
The Commerce Commission’s report has drawn attention to the potential of a stronger Kiwibank as a disruptor to the four major retail banks, and open banking as a “game-changer”, unlocking competition and revolutionising choice for Kiwi consumers.
Commission Chair John Small says further work and consultation since the release of the Commission’s Draft Report in March this year “has only served to reinforce our view that competition isn’t working as it should in this sector, and Kiwi consumers are missing out as a result”.
Dr Small says personal banking services are hugely important to New Zealanders and the broader economy – with almost every household having a bank account and debit card, nearly 60% having a credit card, and a residential mortgage market of around $340 billion.
“In a well-functioning market with strong competition, we’d expect to see more aggressive strategies to win customers from other banks.
“What we see in New Zealand is that the major banks have little strategic differentiation, and their growth targets focus on maintaining market share and protecting margins and profitability.”
Small says this means they avoid significant competitive responses, “resulting in limited investment in innovation, muted competition and some demographics being poorly served currently”.
Finance Minister Nicola Willis was prompt in declaring that she wants Kiwibank to have the growth capital it needs to become a ‘maverick’ that exerts real competitive pressure on the big four.”
The Reserve Bank will be called on to do its bit in fostering bank competition, too.
The ministerial commitments were made on the same day that Climate Change Minister Simon Watts announced the updating of settings for the New Zealand Emission Trading Scheme, an initiative intended to ensure New Zealand has a more credible market
And it followed news that the government is providing immediate relief to employers with upcoming seasonal peaks by creating a new subcategory of the Specific Purpose Work Visa.
Latest from the Beehive
20 August 2024
The Government will act on all 14 recommendations made by the Commerce Commission’s final report into bank competition Finance Minister Nicola Willis and Commerce and Consumer Affairs Minister, Andrew Bayly say.
Settings for the New Zealand Emission Trading Scheme have been updated to ensure New Zealand has a more credible market, Climate Change Minister Simon Watts says.
19 August 2024
The coalition Government is providing immediate relief to employers with upcoming seasonal peaks by creating a new subcategory of the Specific Purpose Work Visa (SPWV).
The ministers who made the announcement about bank competition, Nicolas Willis and Andrew Bayly, have eschewed pejorative words like “bastard”.
Rather, Nicola Willis referenced the Commerce Commission report and said it
“… has proven what’s 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.
“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.”
Therefore the 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. Willis said:
“I share 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.”
There’s a significant role for the Reserve Bank, too:
“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.”
International experience showed that competition was one of the most important drivers of long-term growth and productivity, Willis said.
“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,” Andrew 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.”
Bayly said the Government agrees with the Commission that open banking has the greatest potential to promote ongoing disruptive competition in the medium to long-term and is committed to facilitating its uptake “as quickly as possible.”
Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton
1 comment:
how about we just give up on kiwibank and allow anyone to open a bank with reasonable regulations? if you want innovation and competition, you have to encourage new players instead of betting on a dead horse. there's a very good reason kiwis blame aussie banks but never bother opening an account with kiwibank...
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