Two Parliamentary select committees will conduct inquiry into banking competition, reviewing Commerce Commission's findings and scrutinizing rural lending

Parliament’s Finance and Primary Production Committees will launch a joint inquiry into bank competition, including scrutinizing perceived differences in how banks treat homes and farms.

Finance Minister Nicola Willis wrote to the chairmen of the Finance and Expenditure and the Primary Production committees to request the inquiry. 

The Finance Committee will lead the process in conjunction with the Primary Committee, which will focus on rural banking.

Willis said this fulfilled a coalition agreement between National and New Zealand First to conduct a banking inquiry, and would also be a way to answer questions being asked in the rural sector, notably by Federated Farmers. 

“Growing the rural economy is critical to rebuilding New Zealand’s economy and with farmers’ satisfaction with banking services dropping in recent years, it’s critical we better understand the role of bank competition in that sector,” she said.

The committee inquiry will sit alongside the Commerce Commission's market study into personal banking services which has been released in draft form. The final Commission report's due in August.

Willis asked for the terms of reference to include a review of the Commission’s findings, further scrutiny of competition in business and rural lending, any barriers preventing competition, and the possible impacts of regulations.

Focusing the committees on reviewing the market study and on business and rural lending will help prevent it from duplicating work already done by the Commerce Commission. 

In February, Commerce Minister Andrew Bayly told Interest.co.nz that the committee inquiry would have to wait until the market study had been completed and signaled it would have a broader focus. 

Mark Cameron, chair of the Primary Production Committee, said he agreed the rural banking sector needed further scrutiny. 

“I’ve heard from countless farmers about the disparity between rural and urban bank lending practices, and I have been working on this issue since I became Chair last year,” he said. 

Banking leaders were called in to give the committee a briefing last month, where members questioned them about why farm lending interest rates were so much higher than for property.

Aidan Gent, the general manager of rural banking at ASB, was asked if he would welcome the committee turning the briefing into an inquiry.  

He said he would welcome one, but only if it was “an inquiry for good” that didn’t focus too narrowly on capital regulations or comparisons between property and rural rates. 

“We really encourage this committee to think about how this could potentially be an inquiry for good. This platform needs to be used to set up New Zealand food and fiber for success”. 

New Zealand First sent an email to supporters celebrating the coalition negotiation win and asking for donations to the party. 

“Kiwis have the right to work hard and get ahead without being ripped off at the ATM. We must focus on rebuilding the economy so that we can lift incomes and living standards,” it said.

“This inquiry will ensure that the chairpersons and chief executives of banks operating in New Zealand are made available for questioning — and we will hold them to account for you”.