NZBA CEO Roger Beaumont
The New Zealand government has announced an inquiry into the retail banking market, with a focus on barriers to entry for competitors, the ability to switch banks easily and openness to new technology and services.
“We need to ensure there’s a competitive market among banks providing personal loans, mortgages, credit cards and other banking services so that people have confidence they are getting the best deal possible when doing their banking,” said Finance Minister Grant Robertson, citing “long standing concerns that the market is not working well for New Zealanders”.
“Banks have consistently made high profits over a number of years and their returns have outperformed their peers in other countries.
New Zealand’s banking sector is dominated by fully-owned subsidiaries of the big four Australian banks, which make up around 85 percent of the mortgage and other lending market, and hold a 90 percent share of total bank deposits.
Robertson said New Zealand lags behind other countries such as Australia and the UK into doing a detailed analysis into banking services - but he explicitly ruled out bank culture and conduct as a focus of the inquiry, saying the 2018 investigation into bank culture by the FMA and RBNZ had already resulted in measures to protect consumers.
And, despite Robertson’s comments, the MBIE release previewing the scope of the inquiry does not mention profitability (which is consistently higher and less volatile than that of the banks’ Australian parents). The full terms of reference include the somewhat confusingly-worded bullet point that it will investigate "any impediments to new or innovative banking products or services comparative indicators of bank financial performance (including profitability)".
In a statement, NZ Bankers Association CEO Roger Beaumont gave an indication of the banks’ line of defence, saying they are among the country’s biggest businesses “so their profits look big” and they “also contribute their fair share to New Zealand”.
MonopolyWatch NZ spokesperson Tex Edwards expressed disappointment, saying: "This is not a great day for consumers. It’s not even a good day. It is a rather unexciting (and even predictable) day, foreshadowing a protracted Dr Doolittle inquiry."
The study by the Commerce Commission is due to be completed by August 2024, with a preliminary issues paper expected this August.