New Zealand’s government is firming up options to attract new investors and new capital for Kiwibank, with an initial public offer and a listing on the NZX looking the most probable outcome.
Finance Minister Nicola Willis, in a speech at the National Party conference on Saturday, said she wanted the state-owned bank to grow into a disruptive competitor, Interest.co.nz reports.
“It can’t do that without extra capital. And I am interested in exploring where that capital might come from,” Willis said.
The National Party platform for last year’s election favoured a sell down of the government’s outright ownership of the bank, established by a reluctant Labour government in 2001.
The Crown’s ownership position in Kiwibank has been restructured in recent years, and the bank received a capital top up recently.
Analysis and decisions on the path ahead for Kiwibank will be framed, in part, by the upcoming final report of the NZ Commerce Commission following its Market Study into personal banking.
The Commerce Commission in its draft report in March called for a capital contribution to Kiwibank, suggesting that with better resourcing the bank might yet serve the greater good as an industry ‘maverick’.
“Kiwibank’s owner [the Crown] should consider what is necessary to make it a disruptive competitor, including how to provide it with access to more capital” the ComCom recommended in its draft report.
Debates within and beyond the NZ banking industry over the last four months around the ComCom’s interventionist approach to retail banking have, at times, ranged from the baffling to the naïve.
The Commerce Commission’s pleas for latitude and flexibility on the part of the Reserve Bank of New Zealand – around prudential standards – have fallen on deaf ears, and it seems likely the RBNZ will not be seduced to adopt a more accommodating stance once the ComCom’s final report lands in two week’s time. (Tuesday August 20 is the deadline).
In robust language in its response to the draft report, the RBNZ wrote: “the scale of the required subsidisation (such as weaker prudential regulation or access to capital on non-commercial terms) is not clear and it is not obvious that moving from a market of four to five large banks on its own would necessarily change the incentives and other factors that contribute to the oligopolistic outcomes described in the draft report.
“In our view, the final report should place more emphasis on recommendations that would promote more disruptive competition among all players, including the large banks, effectively incentivising each to be a ‘maverick’.”
Dosh, one of New Zealand’s noisier (and seemingly successful) fintechs was, until recently, a forceful voice campaigning for the RBNZ to simply lower the barriers to entry to foster competition. Dosh had, in particular, wanted the RBNZ to reduce the minimum capital needed to qualify for a licence.
Then, a few weeks ago, Dosh surprised the industry by lodging a formal application with the RBNZ for a banking licence. Dosh’s founders have told NZ media they expect they will be able to raise sufficient capital to meet the RBNZ’s current requirements.
This is a guess, but most probably it will be two years or longer before Dosh (or any other fintech) would be in a position to satisfy the RBNZ of its credentials and preparations to be awarded a banking licence.
In all likelihood, two years or longer is the time horizon that will be relevant to Nicola Willis’s, the Treasury’s and Kiwibank’s deliberations on the path ahead.
This affords plenty of time for exploration of ‘all options’ for the bank.
Including, surely, testing the market for a buyer and arranging a clean exit for the New Zealand government via an outright takeover.