Pedestrian walking past the Reserve Bank of New Zealand building on Saturday, June 22, 2019.
Birgit Krippner | Bloomberg | Getty Images
New Zealand’s government on Tuesday promised a shake-up of consumer banking after the country’s watchdog said the sector lacked competition and suggested improvements including looking at ways to increase state-owned Kiwibank’s capital.
The New Zealand Commerce Commission report released earlier found the country’s four largest lenders, all owned by Australian banks — do not face strong competition in the personal banking sector.
It outlined 14 recommendations including boosting capital for Kiwibank, the country’s fifth-largest lender, lowering barriers to entry and ensuring open banking – which involves banks making customer data available to third parties on request so customers can better shop around — is fully operational by June 2026.
The government had already asked Treasury to engage with Kiwibank’s parent company Kiwi Group Capital on options for raising new capital, Finance Minister Nicola Willis said in a statement.
Options to boost capital included from New Zealand’s voluntary government retirement saving funds, New Zealand investment funds and investment from everyday New Zealanders, she said.
Proposals would be taken to the government later this year.
Willis added she also intended to issue a new Financial Policy Remit for the Reserve Bank of New Zealand this year and in this it would be made clear that the government expected the central bank to support a more competitive banking sector.
New Zealand’s banking system is dominated by four large Australian-owned banks: Westpac Banking Corp, Commonwealth Bank of Australia-owned ASB Bank, National Australia Bank’s Bank of New Zealand, and Australia and New Zealand Banking Group.
New Zealand banks have total assets of NZ$700 billion ($428 billion), according to the Banking Association. The residential mortgage market is worth around NZ$340 billion, while almost all households have a bank account and 60% have credit cards, according to the Commerce Commission.
Commerce and Consumer Affairs Minister, Andrew Bayly said the government was already implementing policy for open banking and this was on track to meet the Commission’s recommended timeline.
“We agree with the Commission that open banking has the greatest potential to promote ongoing disruptive competition in the medium to long-term and are committed to facilitating its uptake as quickly as possible,” Bayly said.
Bank of New Zealand chief executive Dan Huggins said he supported the Commission’s focus on accelerating a consumer data right to enhance competition through open banking.
“We have aspirations to accelerate growth across our business and would welcome sensible changes that help enhance competition for the benefit of all New Zealanders,” he added.
New Zealand Banking Association Chief Executive Roger Beaumont said the report had provided useful insights into the New Zealand banking sector.
“We will assess which initiatives could involve an industry approach, and which ones banks will need to address individually,” he said.