Ministers hope to shake up banking competition by powering up KiwiBank
Stuff reporters
Dec 09, 2024 •06:55pm
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Finance Minister fires warning shot to big banks
The Government hopes to encourage KiwiSaver funds and other local investors to inject an additional $500 million of capital into Kiwibank so it can become a bigger player in
the banking market.
Finance Minister Nicola Willis said a range of measures would be needed to change the banking sector but it accepted
the advice of the Commerce Commission that a larger Kiwibank would make a difference.
“Treasury have been directed to talk to New Zealand KiwiSaver funds, New Zealand investment institutions and New Zealand professional investor groups about a potential investment of up to $500 million in the bank,” Willis said on Monday.
A public share offering might be an option to raise further funds in the longer-term, but Kiwibank wasn’t likely to be ready for that until it completed an overhaul of its IT systems in 2028, she said.
That meant no decision would be made on a share-market float during the term of the current government.
Prime Minister Christopher Luxon and Finance Minister Nicola Willis.Robert Kitchin / Stuff
Willis said she had also communicated her expectation that the Reserve Bank place a greater emphasis on banking competition across a range of its policies and actions.
Those expectations were in the form of a revised Financial Policy Remit, which asked the bank to prioritise:
- 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
- working with industry to make bank accounts more widely available.
“The Commerce Commission’s market study of the banking sector found that the sector was uncompetitive, and New Zealanders were not well-served by a highly profitable, two-tier oligopoly,” Willis said.
“Cabinet expects the major trading banks work to deliver a fairer deal for bank users, including accelerating open banking, improving the payments New Zealand switching service and allowing greater comparison between home loans.
“The big banks are on notice. The Government is explicitly leaving open the possibility of further action if we don’t see enough progress.”
Kiwibank’s 100% shareholder Kiwi Group Capital Limited (KGC) and Kiwibank said they supported the Government's announcement.
“This is closely aligned with KGC's strategic objective to assist Kiwibank to carry out and develop its business. KGC will support the Treasury to undertake the preparatory work required by the Crown to understand what a private placement to suitable New Zealand institutions might look like," KGC Chair David McLean said.
“In considering capital raising options, KGC is committed to preserving Kiwibank’s Purpose and Kiwi identity.”
Kiwibank chief executive Steve Jurkovich said that Kiwibank was up for the challenge of taking on the larger banks and would welcome further access to capital over time.
“Kiwibank’s faster than market growth shows that we are fulfilling our role as a competitive alternative to the larger banks and with more Kiwi choosing us momentum is on our side. We believe this reflects a clear preference among many Kiwi for a New Zealand-owned bank, whose earnings and profits are retained in Aotearoa,” he said.
“With access to additional sources of capital we can grow faster and create even more competition in the banking sector as we continue to deliver on our Purpose of Kiwi making Kiwi better off. We believe that can only be a good thing for our customers and New Zealand, both now and in the future.”
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