In his column in The Telegraph published on 19 May, “Deluded Labour will never let go of its EU fantasy,” Tom Harris said, “Such is how myths are made in modern Britain. Europhilia is similar to Thatcherphobia – it’s less about actual policies and empirical evidence than about feelings, and the less you remember about it, the stronger you feel.”
I made a note of it because the subordination of historical fact to feelings is so relevant to contemporary New Zealand and Tom Harris’ expression neatly captures the way passage of time and appeal to emotion may result in apparently serious pronouncements being evidence of sheer lunacy.
Such was Winston Peter’s solemn pledge that New Zealand First policy would include buying back the BNZ.
I expect I’m going to refer to Hunt’s aphorism again in other contexts, but for starters I’m taking off my lawyer’s hat and putting on my retired banking hat. I was a trustee and Deputy President of the Board of Trustees of the Auckland Savings Bank which became ASB Bank in 1986, then chairman of ASB Bank Ltd from 1988 until I retired from the board in 2012.
With the benefit of that experience, I was utterly astounded to learn that Winston, despite his long experience in and around government interactions with banking has seemingly forgotten the historical evidence showing why his idea is so silly.
I say seemingly forgotten because I do not believe for one moment that he really has forgotten. His involvement in the politics around banking and connected areas is so longstanding and intense, that it beggars belief that he is not fully aware of the hazardous nature of the undertaking he is advocating.
Rather, Peters is creating a myth. He is ‘banking’ on NZF members and the public being unaware of or forgetting the historical evidence that government ownership is a prescription for potential disaster and allowing sober reality to be overwhelmed by the feeling that it would be lovely to own a big bank.
The last critical banking disaster was the global financial crisis which came to a head in 2008. That’s 18 years ago, so only voters in their late thirties would realistically have any substantive memory of it, especially as banks in New Zealand and Australia weathered the storm, with high concern but nevertheless in good shape.
The GFC was a severe worldwide economic crisis triggered by the collapse of the U.S. housing market, leading to widespread bank failures, recessions, and government interventions. While the GFC was not a consequence of government ownership of banks as such, a significant contributor was US government interventions in banking.
Sanctions were imposed on banks which did not lend to people categorised as disadvantaged, people to whom prudent bankers would not usually grant loans because of their lack of creditworthiness. These were the so-called subprime mortgages.
Government sponsored financial institutions, Fanny Mae (the Federal National Mortgage Association) and Freddy Mac (Federal Home Loan Mortgage Corporation), encouraged the grant of subprime mortgages by securitizing mortgage loans into mortgage-backed securities which allowed lenders further funds to make even more loans including of the subprime variety. At the time of the GFC Fanny and Freddy had outstanding more than US$5 trillion in mortgage-backed securities.
These mortgage-backed securities had been taken up by banks and other institutions in the US and world-wide. When the loans went bad, these assets’ book values far exceeded their market value so that if they were ‘marked to market’ the institution made massive losses and in many cases insolvency resulted.
Previously, banks in Australia and New Zealand had been badly affected by the share market crash of October 1987, and the property crisis which followed. A beneficial consequence was heightened consciousness of the need for careful risk management. When the GFC arrived Australasian banks generally held little of the bad paper and were well capitalised. Although there was much concern because of the international financial environment and consequential credit contraction, banks in this part of the world were able to weather the storm in remarkably good shape.
The history of the events following the 1987 crash goes back 30 or 40 years. It’s likely that only people who were significantly involved, like Winston Peters and me, would have much memory of those events.
In pledging to buy back the BNZ, Winston is relying on his audience’s feelings and what I think is a truism that “the less you remember about it, the stronger you feel.” He knows that almost everyone he wants to appeal to will have little or no understanding of the facts or memory of the history.
The folly of a debt-ridden nation taking on very substantial additional debt to purchase a bank is self-evident. The purchase price would be in the billions. When NAB bought the BNZ in 1992, the offer valued the BNZ at $1.5 billion, and it was a cot case at the time, albeit some have argued that NAB got it at an undervalue. If it were sold for less than it was worth, which does seem likely, that is an example of general government ineptitude when it comes to business matters. The government sold in 1992 because it had already had to rescue the bank and wanted to avoid the risk of having to do so again.
Simply put, banking may be a perilous business without careful management and access to capital when needed. Government ownership not only puts the public purse at risk because the government owner may need to provide capital in times of crisis but also because it creates perverse incentives for management to take excessive risks secure in the belief that the taxpayer is standing behind the bank.
This perverse incentive is exacerbated by the often-irresistible temptation to meddle to advance political objectives. The last point is particularly pertinent to NZF. NZF are economic interventionists. They make no bones about their belief that government should select investment targets. That’s the way the provincial growth fund of the Labour/NZ First 2017-2020 government worked. A large captive bank would be a lovely political toy for a government NZF was part of.
Let’s now look at some more history. In the 17 May 2026, announcement, Peters said, “After all, when National sold BNZ to NAB in November 1992, it then had six of every ten New Zealand banking customers.” I cannot find data to support that claim which seems likely to be untrue. At the time, other major banks were ANZ, Westpac, National Bank of New Zealand, the Trust Bank group and, of course, ASB which was predominant in personal banking in the populous Auckland market and in Northland. If Peters is correct, it means they (along with other smaller players like TSB and Countrywide) shared the remaining 4 out of 10 NZ banking customers.
More importantly, Peters didn’t add that the BNZ was essentially insolvent in 1990 when the government as the majority shareholder had to put in $380 million: incoming prime minister Bolger was told that the bank “has to report by Friday and if it’s not given support by then, it will collapse”. The sorry saga of the collapse and subsequent sale to NAB was sketched out by the late Brian Gaynor in Looking Back – BNZ Part 7: The final twist – NAB grabs BNZ at a discounted price. Peters must remember the saga for as a National Party member of the Bolger government he was highly critical of the way the BNZ problem was dealt with, and rightly so.
The majority government owned BNZ collapse was in keeping with several collapsed government owned Australian banks.
The State Bank of Victoria was in trouble in 1990, when the Victorian government was forced to sell it to Commonwealth Bank. The researcher referred to below in connection with the State Bank of New South Wales, Jan Newby, recorded:
The State Bank of South Australia collapsed in 1991. Newby recorded:
The State Bank of New South Wales also faced problems. The NSW government sold it to Colonial Mutual in 1994. In a history of the bank, Grokipedia records:
The source for Grokipedia’s description is The Proposed Privatisation of the State Bank of NSW: Background Issues, by Jan Newby, researcher in the NSW parliamentary library. Newby recorded the government’s position:
Government debt, potential financial exposure and where a government’s focus should be must always be considerations attending proposals for government ownership of a bank.
Returning to the BNZ, an example of BNZ’s reckless adventurism was its involvement in the tax avoidance schemes utilising the Cook Islands as a tax haven, set up by Michael Fay and David Richwhite and associates in 1986. This led to the ‘winebox’ commission of inquiry. In Winebox winners and losers, Gaynor noted that BNZ’s involvement cost it $32 million and BNZ’s minority shareholders $30 million.
Winston Peters knows all about this for it was he who “brought the documents at the centre of the allegations to Parliament in a winebox,” and called for the inquiry.
I was and remain a supporter of the economic reforms introduced by the fourth Labour government 1984-1987 (which, it ought to be remembered, resulted in an increased vote for Labour in 1987 from an electorate which supported the reforms), but the way the government was sucked in by Fay, Richwhite and associates is a blight on its otherwise fine record. It is also another example of governments’ inability competently to handle business matters. Admittedly, it was reducing the government involvement in business which had accelerated during the Muldoon years. Governments do not do it well either when going in or when getting out.
The lesson which should be obvious to any thinking person who is not seduced by political considerations (like the shameless Winston Peters) is that government should focus on its core functions and stay well away from those which are not.
As an aside, the amnesia concerning the state of the economy when Muldoon was ejected in 1984, the need for the reforms introduced by Douglas, Prebble, Bassett and colleagues, and the portrayal of the reforms as an evil assault on New Zealanders’ way of life is another example of ‘how myths are made in modern New Zealand,’ by appealing to feelings instead of facts.
Gary Judd KC is a King's Counsel, former Chairman of ASB and Ports of Auckland and former member APEC Business Advisory Council. Gary blogs at Gary Judd KC Substack where this article was sourced.
With the benefit of that experience, I was utterly astounded to learn that Winston, despite his long experience in and around government interactions with banking has seemingly forgotten the historical evidence showing why his idea is so silly.
I say seemingly forgotten because I do not believe for one moment that he really has forgotten. His involvement in the politics around banking and connected areas is so longstanding and intense, that it beggars belief that he is not fully aware of the hazardous nature of the undertaking he is advocating.
Rather, Peters is creating a myth. He is ‘banking’ on NZF members and the public being unaware of or forgetting the historical evidence that government ownership is a prescription for potential disaster and allowing sober reality to be overwhelmed by the feeling that it would be lovely to own a big bank.
The last critical banking disaster was the global financial crisis which came to a head in 2008. That’s 18 years ago, so only voters in their late thirties would realistically have any substantive memory of it, especially as banks in New Zealand and Australia weathered the storm, with high concern but nevertheless in good shape.
The GFC was a severe worldwide economic crisis triggered by the collapse of the U.S. housing market, leading to widespread bank failures, recessions, and government interventions. While the GFC was not a consequence of government ownership of banks as such, a significant contributor was US government interventions in banking.
Sanctions were imposed on banks which did not lend to people categorised as disadvantaged, people to whom prudent bankers would not usually grant loans because of their lack of creditworthiness. These were the so-called subprime mortgages.
Government sponsored financial institutions, Fanny Mae (the Federal National Mortgage Association) and Freddy Mac (Federal Home Loan Mortgage Corporation), encouraged the grant of subprime mortgages by securitizing mortgage loans into mortgage-backed securities which allowed lenders further funds to make even more loans including of the subprime variety. At the time of the GFC Fanny and Freddy had outstanding more than US$5 trillion in mortgage-backed securities.
These mortgage-backed securities had been taken up by banks and other institutions in the US and world-wide. When the loans went bad, these assets’ book values far exceeded their market value so that if they were ‘marked to market’ the institution made massive losses and in many cases insolvency resulted.
Previously, banks in Australia and New Zealand had been badly affected by the share market crash of October 1987, and the property crisis which followed. A beneficial consequence was heightened consciousness of the need for careful risk management. When the GFC arrived Australasian banks generally held little of the bad paper and were well capitalised. Although there was much concern because of the international financial environment and consequential credit contraction, banks in this part of the world were able to weather the storm in remarkably good shape.
The history of the events following the 1987 crash goes back 30 or 40 years. It’s likely that only people who were significantly involved, like Winston Peters and me, would have much memory of those events.
In pledging to buy back the BNZ, Winston is relying on his audience’s feelings and what I think is a truism that “the less you remember about it, the stronger you feel.” He knows that almost everyone he wants to appeal to will have little or no understanding of the facts or memory of the history.
The folly of a debt-ridden nation taking on very substantial additional debt to purchase a bank is self-evident. The purchase price would be in the billions. When NAB bought the BNZ in 1992, the offer valued the BNZ at $1.5 billion, and it was a cot case at the time, albeit some have argued that NAB got it at an undervalue. If it were sold for less than it was worth, which does seem likely, that is an example of general government ineptitude when it comes to business matters. The government sold in 1992 because it had already had to rescue the bank and wanted to avoid the risk of having to do so again.
Simply put, banking may be a perilous business without careful management and access to capital when needed. Government ownership not only puts the public purse at risk because the government owner may need to provide capital in times of crisis but also because it creates perverse incentives for management to take excessive risks secure in the belief that the taxpayer is standing behind the bank.
This perverse incentive is exacerbated by the often-irresistible temptation to meddle to advance political objectives. The last point is particularly pertinent to NZF. NZF are economic interventionists. They make no bones about their belief that government should select investment targets. That’s the way the provincial growth fund of the Labour/NZ First 2017-2020 government worked. A large captive bank would be a lovely political toy for a government NZF was part of.
Let’s now look at some more history. In the 17 May 2026, announcement, Peters said, “After all, when National sold BNZ to NAB in November 1992, it then had six of every ten New Zealand banking customers.” I cannot find data to support that claim which seems likely to be untrue. At the time, other major banks were ANZ, Westpac, National Bank of New Zealand, the Trust Bank group and, of course, ASB which was predominant in personal banking in the populous Auckland market and in Northland. If Peters is correct, it means they (along with other smaller players like TSB and Countrywide) shared the remaining 4 out of 10 NZ banking customers.
More importantly, Peters didn’t add that the BNZ was essentially insolvent in 1990 when the government as the majority shareholder had to put in $380 million: incoming prime minister Bolger was told that the bank “has to report by Friday and if it’s not given support by then, it will collapse”. The sorry saga of the collapse and subsequent sale to NAB was sketched out by the late Brian Gaynor in Looking Back – BNZ Part 7: The final twist – NAB grabs BNZ at a discounted price. Peters must remember the saga for as a National Party member of the Bolger government he was highly critical of the way the BNZ problem was dealt with, and rightly so.
The majority government owned BNZ collapse was in keeping with several collapsed government owned Australian banks.
The State Bank of Victoria was in trouble in 1990, when the Victorian government was forced to sell it to Commonwealth Bank. The researcher referred to below in connection with the State Bank of New South Wales, Jan Newby, recorded:
The State Bank of Victoria was sold to the Commonwealth Bank in 1991 following the collapse of finance subsidiary Tricontinental in 1990. The total cost to the Victorian taxpayers estimated at $3 billion.
The State Bank of South Australia collapsed in 1991. Newby recorded:
The Government rescues the State Bank in February 1991 with promises of $1 billion. In May 1992 more than $4 billion in non-performing loans were transferred to State Treasury. In September 1992, Premier John Bannon resigned before a Royal Commission Report. The total cost to South Australian taxpayer was estimated at $3 billion.
The State Bank of New South Wales also faced problems. The NSW government sold it to Colonial Mutual in 1994. In a history of the bank, Grokipedia records:
By mid-1994, a half-year profit of $19.7 million was recorded, yet ongoing concerns over capital demands and the state’s $18.7 billion guarantee on deposits—straining public finances and credit ratings—prompted divestment considerations.[1] On 25 November 1993, Premier John Fahey announced plans for a restricted trade sale excluding Australia’s four major banks, aiming to reduce state debt by $1.84 billion and eliminate exposure, with conditions mandating retention of branches, staff, and Sydney headquarters.[1]
The source for Grokipedia’s description is The Proposed Privatisation of the State Bank of NSW: Background Issues, by Jan Newby, researcher in the NSW parliamentary library. Newby recorded the government’s position:
In the Governor’s Speech at the opening of the fourth session of the fiftieth Parliament on 1st March, 1994, it was stated ‘the Government has already announced its intention to sell the State Bank. The sale would reduce the State’s debt by $18.4 billion, remove a potential financial exposure and enable the Government to focus more clearly on its core functions’.
Government debt, potential financial exposure and where a government’s focus should be must always be considerations attending proposals for government ownership of a bank.
Returning to the BNZ, an example of BNZ’s reckless adventurism was its involvement in the tax avoidance schemes utilising the Cook Islands as a tax haven, set up by Michael Fay and David Richwhite and associates in 1986. This led to the ‘winebox’ commission of inquiry. In Winebox winners and losers, Gaynor noted that BNZ’s involvement cost it $32 million and BNZ’s minority shareholders $30 million.
Winston Peters knows all about this for it was he who “brought the documents at the centre of the allegations to Parliament in a winebox,” and called for the inquiry.
I was and remain a supporter of the economic reforms introduced by the fourth Labour government 1984-1987 (which, it ought to be remembered, resulted in an increased vote for Labour in 1987 from an electorate which supported the reforms), but the way the government was sucked in by Fay, Richwhite and associates is a blight on its otherwise fine record. It is also another example of governments’ inability competently to handle business matters. Admittedly, it was reducing the government involvement in business which had accelerated during the Muldoon years. Governments do not do it well either when going in or when getting out.
The lesson which should be obvious to any thinking person who is not seduced by political considerations (like the shameless Winston Peters) is that government should focus on its core functions and stay well away from those which are not.
As an aside, the amnesia concerning the state of the economy when Muldoon was ejected in 1984, the need for the reforms introduced by Douglas, Prebble, Bassett and colleagues, and the portrayal of the reforms as an evil assault on New Zealanders’ way of life is another example of ‘how myths are made in modern New Zealand,’ by appealing to feelings instead of facts.
Gary Judd KC is a King's Counsel, former Chairman of ASB and Ports of Auckland and former member APEC Business Advisory Council. Gary blogs at Gary Judd KC Substack where this article was sourced.
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