Bank workers' union First Union is calling for staff from across the big four banks to be allowed to bargain together, banks' net interest margins to be regulated and a levy on bank profits to combat "bankflation."
First Union makes these suggestions in a submission, with the ActionStation community campaigning organisation, to Parliament’s Finance and Expenditure and Primary Production committees' bank inquiry.
The union notes interest rates are the key tool the Reserve Bank uses to control inflation. However, it argues rising interest rates "create a possible cover" for banks to increase profits through rising margins.
"As the cost-of-living crisis continues, surging bank profits impose costs across the economy, a dynamic we call 'bankflation'," First Union says.
"Cumulative 'big four' bank profits have increased 80% in the last decade. Over that period, average annual profit increases have been running at triple the rate of average annual wage increases negotiated in bank worker collective agreements."
"NZ banks’ net interest margins, the difference between lending and borrowing rates, are now at their highest level in 17 years. This means mortgagors, businesses and consumers endure relatively high borrowing rates, while depositors receive relatively low deposit rates," says First Union.
To end "bankflation" it's calling for industry bargaining, increased competition, regulation, and windfall taxes and levies.
"Workers from across the 'big four' [ANZ, ASB, BNZ and Westpac] need to be able to bargain together to get the increases they need. This could be by way of a Fair Pay Agreement or a Multi-Employer Collective Agreement. The money is there, the 'big four' just need a reminder of who it is that earns it for them," First Union says.
It supports calls for the structural separation of the big four banks, but suggests common shareholdings may undermine a more competitive market.
"The entry of other major international players into the NZ banking industry may therefore be preferable," First Union says.
It goes on to say when bank margins surge during a cost-of-living crisis, banks exacerbate that crisis.
"The Reserve Bank already keeps quarterly data on banks’ net interest margins. Government should consider establishing a regulatory framework that allows for the limiting of net interest margins to support living standards."
First Union says when the parliamentary banking inquiry was first announced, it called for an immediate 5% levy on bank profits.
"Despite Treasury’s opposition to a windfall tax, the surge in bank profits experienced since the Reserve Bank began hiking interest rates shows a clear set of events. We believe the case for additional taxes and levies on the big four banks remains strong," says First Union.
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8 Comments
But surely the increased lending would mean the fixed costs are lower spread over almost double the lending. Infact when you consider the staff redundancy over the period the costs are probably less. And yet the banks maintain or increase their margin.
It really is just a tax paid to the big four.
Agreed. If the banks have deployed 80% more capital for lending, then you'd expect an 80% increase in the dollar profits. They should be looking at return on equity.
Caution to the unintended consequences too. Force banks to make less profit -> Kiwisaver providers with shares in Australian banks -> Kiwisaver members see less return.
If the RBNZ issue debt to the banks and banks issue it to us with a margin, isn't that effective slowing down the rate we as a country pay down debt?
its like having a middle man in you mortgage, say @ 5% to the bank, middle man charges 0.5% for services, its slows down has fast you pay the mortgage.
So if bank margins become too how they're unnecessarily slowing down the countries debt payments.
i hope that makes sense?
Did they run this past their members?
Did they advise them that seeking to limit the banks' profits would also hit the members in the pocket because there's likely a portion of their income/bonus dependent on the bank making a higher profit?
Did they advise them the time-honoured bank response to lower profits is cost cutting, which will include retrenchment and/or outsourcing?
There are no free lunches. The union is Lord Farquaad.
Unions...up to around 20 years ago there was a Colgate factory in Petone that had been there ~50years (Unilever at the other end of the street for ~100years). Both long gone now, along with the $ millions of wages & salaries paid directly annually plus the local suppliers & service companies.
Colgates fate was sealed when the Unions decided to stop work & picket the factory during contract negotiations, demanding wage increases etc. Somewhat typical of NZ Unions grandstanding tactics, all media invited, aimed at embarrassing a visiting USA Corporate manager/director.
He took quite a different view of an appropriate response.
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