"The risk is that Kiwibank simply scales into a smaller version of the incumbents." Photo: RNZ / Marika Khabazi
Reaction to Parliament's finance and expenditure select committee banking report was mixed, although one analyst saw it as possibly entrenching the status quo and the dominance of the big four Australian-owned banks.
The committee has released its report from the cross-party inquiry into banking competition, but has acknowledged its findings will not be new to the sector, and unlikely to be a silver bullet for competition.
The committee met over the course of 13 months, hearing from 216 organisations and individuals.
Victoria University associate professor Martien Lubberink said the report largely mirrored the findings of the Commerce Commission banking study and confirmed what was already known, namely the local market was profitable and stable, and the big four controlled 90 percent of the market.
He said the report also undercut notions that Kiwibank, even with a $500m capital injection, would be a real challenge to the big four.
"Even with additional equity, the risk is that Kiwibank simply scales into a smaller version of the incumbents, rather than reshaping the market. That is not disruption - it is reinforcement of the status quo."
Lubberink said the recommendation for the Reserve Bank (RBNZ) to stop increasing the minimum capital levels banks should hold would not help local borrowers, but favoured the big four.
"Because they tend to run close to regulatory minimums, with little headroom beyond requirements, a halt in capital increases therefore provides them with immediate relief."
He said the big banks decided their own risk levels, which delivered lower capital levels, while small banks had to hold more capital to bank a similar sized loan.
"While presented as pro competition, the effect is to shore up the position of the largest incumbents," Lubberink said.
"These recommendations reveal an uncomfortable truth - even well-intentioned reforms may entrench the very market structure they seek to challenge."
Banks react
Kiwibank said the committee's report matched its own thinking on many issues, such as regulation and barriers to competition.
Chief executive Steve Jurkovich said the bank was growing faster than its competitors, but needed better industry rules to bring a more level playing field.
"It's encouraging to see recognition that the current capital regime may be holding back smaller banks," he said. "A more balanced approach will unlock innovation and ensure Kiwis have genuine choice in banking."
"We look forward to the government's review of the Reserve Bank's capital settings and outcomes that better support competition."
The country's biggest bank, ANZ, said the industry was already competitive and the bank had been implementing recommendations made in the Commerce Commission report.
"Competition is strong. More New Zealanders are using open banking services, switching between providers is at record levels and increased transparency around pricing is reflected in more positive farmer sentiment," chief executive Antonia Watson said.
She pushed back against accusations that bank profits were excessive, saying the committee had followed the Commerce Commission's "inaccurate comparisons".
"It is important not to lose sight of ANZ NZ's broader role in the economy," Watson said. "We're one of the largest importers of foreign capital into New Zealand, with close to $19 billion invested."
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