The government is taking steps to increase competition in the banking sector, with Finance Minister Nicola Willis announcing measures to strengthen Kiwibank and urging the Reserve Bank to place greater emphasis on fostering competition.
The moves are designed to enable Kiwibank to compete more effectively against the dominant Australian-owned banks.
“We’re trying to give the little brother a bit more muscle to get a fairer deal for Kiwis,” said Willis.
The plans include providing Kiwibank with additional capital, with a proposed investment of up to $500 million. Talks are underway with KiwiSaver funds, New Zealand investment institutions, and professional investor groups to secure the funding.
Willis said this would not involve an asset sale, as all funds would be used for Kiwibank’s growth. In the long term, an Initial Public Offering (IPO) could provide further capital, but this won’t be considered until Kiwibank’s ongoing “digital transformation” is completed by 2028.
To reassure potential investors, the Government is considering an option for them to sell shares back to the Crown at fair value if an IPO is not approved.
The Reserve Bank’s Financial Policy Remit is to be revised to stress the importance of competition alongside financial stability.
Additional expectations of the Reserve Bank include:
- expanding access to the exchange settlement system with decisions by March 2025
- reviewing risk weighting for a range of bank lending
- reviewing minimum capital thresholds for new entrants into the banking sector
- reviewing restrictions on the use of the word “bank”
- dismantling barriers to lending for housing on Māori freehold land; and
- working with industry to make bank accounts more widely available.
“The Commerce Commission’s market study found that New Zealanders were not well-served by the current banking structure,” said Willis, highlighting the two-tier oligopoly of the big banks.
Cabinet has set clear expectations for major trading banks to improve outcomes for customers, including accelerating open banking and making home loan comparisons more accessible.
“The big banks are on notice,” warned Willis. “If we don’t see enough progress, further action remains on the table.”
“This is a pro-competition Government because competition means a better deal for customers,” Willis concluded.
Why doesn’t the corporate state bank with kiwibank? Put your money where your mouth is and all that.
When public say, “put your money where your mouth is”. We didn’t mean to eat it.
Kiwibank could spend some coin on their internet banking. It has nowhere near the function of say ANZ.
Try SBS. They’re local.