The Government is set to announce a Commerce Commission market study into the banking industry on Tuesday, interest.co.nz understands.
A market study is an in-depth study into the factors affecting competition for particular goods or services, to find out how well competition is working in a specific sector of the economy, and whether it could be improved. Full details of the study will be revealed when the official announcement is made.
Earlier market studies have focused on retail fuel, retail grocery and residential building supplies.
Speculation has been swirling for months that banking could be the subject of the next market study. The opposition National Party proposed a quicker but shallower Select Committee inquiry instead. And the Green Party and First Union called for a levy on bank profits.
The banking sector is dominated by the highly profitable Australian-owned oligopoly of ANZ, ASB, BNZ and Westpac. In February Reserve Bank Chief Economist Paul Conway told Newsroom the banking sector "would be an appropriate focus for a market study, should the Government wish to go there."
In March Roger Beaumont, CEO of bank lobby group the New Zealand Banking Association (NZBA), said bank profits look big because banks are among New Zealand's biggest companies. Beaumont said NZ's banks were profitable, well-regulated and resilient, and that was important in the current economic climate.
“Last year banks made a net contribution to our economy of $1.92 billion. They spent $9.1 billion running their businesses and paying tax in New Zealand, compared to combined profits of $7.18 billion ... Our banks’ average return on equity is 13.4%, which falls in the middle of the pack when compared to other major New Zealand companies," Beaumont said.
NZBA could not be reached for comment on the latest development.
Asked about the potential for a Commerce Commission market study BNZ CEO Dan Huggins told interest.co.nz in May that BNZ would cooperate with any such study but he didn't think it was necessary.
"If the Government chooses to do that then clearly we'll participate and we'll provide whatever is requested of us," Huggins said.
"I think the industry is incredibly competitive, there's 30 banks, building societies and credit unions. There's lots of choice. The industry is already highly regulated by strong regulators to ensure good outcomes. We are delivering good customer outcomes. And therefore I don't think it's necessary to have that review," said Huggins.
The market study into the grocery industry found the industry was dominated by a duopoly of Foodstuffs and Woolworths NZ, whose practices inhibited the growth of competition.
An earlier report found an active wholesale market did not exist for the motor fuel industry in NZ, and this weakened price competition in the retail market.
22 Comments
Goodie. Doubtful it will be done prior to the election but if it does, then I already know what it will say.
no evidence of collusion between banks, in fact no evidence of anything. However margins are assessed to be too high (in their opinion).
No action to be taken and nothing to be done.
However, recommendation to banks to reduce margins, and if advice not taken, promise to investigate again, with no time period specified.
Political fluffing of the pillow for the election by Labour.
Banks are the primary drivers and profiteers of the Housing bubble in New Zealand and deserve the god damn blame.
They deserve the same blame they should get for the Land Wars when BNZ (and a couple other banks) funded all the dodgy speculative landbanking for the settlement of the Waikato that drove the war.
Until we
- Nationalise the banks or
- Impose a new Glass-Steagall forcing the big Four out of housing and to only participate only in commercial banking while founding dozens of new 'safe' community banks to provide productive loans, based on the work of Professor Werner.
We should not tolerate a third housing bubble after two successive housing bubbles which impose huge social, economic and human costs on us.
Kiwis love to shoot themselves in the foot. Our banks stood up well to the world financial crisis in 2008, unlike many U.S. and banks in other countries where there were failures.. There is no reason to weaken NZ banks with further regulation.
Now the Greens are calling for a wealth tax, which will result in significant capital flight. But of course, nobody cares if this further weakens the banking system. Nobody needs the banks..
To claim that the banks are responsible for standing up well during the GFC is a nonsense.
They did so because both NZ and Australia have strict regulation enforced by central banks. Without this oversight the history would be vey, very different. (I'm old enough to remember many of NZ's banks getting into serious trouble and having to be bailed out!)
(As an aside - a wealth tax set low would not result in capital flight. Ditto Land Tax, CGT, etc. Stop trying to protect the wealthy. We don't need it.)
"I think the industry is incredibly competitive, there's 30 banks, building societies and credit unions. There's lots of choice."
I nearly fell out of my chair in shock!
BNZ CEO Dan Huggins has has a very strange definition of what 'competition' looks like. This is why the "b" in banker so often gets replaced.
"Banking" in NZ is mainly about residential mortgages, TDs and retail accounts. This function can be automated and run by a computer program with occasional parameter tweaks.
Ergo - retail banking in NZ is mainly a utility. I.e. akin to water, electricity, etc.(which are arguably far more complex.)
It therefore follows that the residential mortgages, TDs and retail account function should be nationalised.
(I'm starting a company to manufacture guillotines. IPO soon. Stay tuned.)
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