The first consultation paper from part two of the Government's Reserve Bank Act review gives some good detail on the New Zealand financial system that, once again, highlights the dominance of our four Australian owned banks.
The paper notes there are 26 registered banks in NZ, but ANZ, ASB, BNZ and Westpac between them account for 87% of bank assets.
"New Zealand’s banking system is relatively small in dollar terms, but similar to the average of other OECD countries when compared with the size of the economy. In March 2018 the banking system’s assets were worth $527 billion, equivalent to 186% of GDP," the paper points out.
It notes financial firms that offer deposit products, but are not registered banks, such as building societies, credit unions and finance companies, must obtain a non-bank deposit taker (NBDT) licence from the Reserve Bank. There are 25 licensed NBDTs with a total asset value of $2.5 billion. Meanwhile, other non-bank lenders that don't take deposits, and thus are neither banks nor NBDTs such as Latitude Financial Services, have total assets of $9.7 billion.
The insurance sector has about $70 billion in total assets, equivalent to 25% of GDP, with the sector split between 90 licensed private insurers and an unlicensed sector. The Reserve Bank regulates and supervises licensed insurers.
The three largest unlicensed insurers, the Accident Compensation Corporation, the Earthquake Commission and Southern Response Earthquake Services, are all government owned with the rest of the unlicensed sector comprising small private insurers.
"In addition to financial firms, New Zealand’s financial system includes capital markets. These markets involve the buying and selling of bonds (debt) and equity instruments. Capital markets are used to fund investment or facilitate takeovers, and to provide risk mitigation and diversification. These markets are small compared with the size of the banking sector. The total value of the stock market is around $135 billion, the total value of the domestic private debt market is around $132 billion, and the fund management sector has around $125 billion of assets (domestic and offshore) under management," the paper says.
Also see: Bringing the banks and non-banks together? And Depositor protection looms large.
14 Comments
Funnily enough, Aussie has the same issue we do. Their banks are owned by JP Morgan, National Nominees, Citigroup and HSBC:
https://tottnews.com/2016/02/13/analysis-who-really-owns-the-big-4-bank…
It all seems to flow in one direction via an elaborate ownership scheme. Why just pillage NZ when you can pretty much pillage the whole world.
Hi Gareth. More just trying to highlight ownership structures of Banks. They are one of the most important institutions in society in general so it is good to get an understanding of who owns what and who profits. As you've probably picked up, credit creation is one of my biggest bugbears, I think it's unfair that profit can be made in this way and then siphoned away hence why I tried to show where to (not the full picture but a good reminder that the Aussie banks aren't the be all and end all). I don't think highlighting a small part of the ownership structure is conspiratorial or atleast that wasn't my intention.
it would be interesting to know who the ultimate owners are. The Saudi Royal Family, Vladimir Putin, the CCP, wealthy Americans? There is something different about the ultimate owners not living here and being part of the same team, so to speak. It is tribute to a foreign power in many respects. There are real issues here that we turn a blind eye to and therefore choose not to understand.
The label "conspiracy theory" is usually a put down used by leftie types to cover their devious schemes for Control, not that Gareth meant it that way. The world is full of special interests and conspiracies, everyone belongs to several special interest groups. Conspiracy theories are just wild speculations about the unknowable conpiracies that exist. Just because some of them are fruity doesn't mean we shouldn't be open minded about the possibility and the danger.
If it involves a group of any sort it's almost out of bounds whether or not there is merit to what is said now. We don't have to lose our freedom of speech laws to lose freedom of speech if we sociatily police what is said through a social justice/politically correct framework. Some of the most benificial conversations in our lives are the most uncomfortable.
Assuming even asset splits (not actually true) between the 4 big banks for the 87%, kiwibank at 7.4% for the 39bn and then 21 other covering the remainder, the HHI index comes out at 0.195 which means moderate concentration (range = 0.15 to 0.25).
If the asset split between the big 4 is uneven then the HHI will be closer to 0.25.
Provides a good argument for ComCom to force further competition to get the HHI below 0.15
An H below 0.01 (or 100) indicates a highly competitive industry.
An H below 0.15 (or 1,500) indicates an unconcentrated industry.
An H between 0.15 to 0.25 (or 1,500 to 2,500) indicates moderate concentration.
An H above 0.25 (above 2,500) indicates high concentration
We know that NZ's big 4 banks are amongst the most profitable banks in the world - https://www.interest.co.nz/business/88451/big-4-new-zealand-banks-still-near-top-international-profit-heap-despite-little-belt
We also know that technically there's plenty of banking competition in NZ - https://www.rbnz.govt.nz/regulation-and-supervision/banks/list-of-registered-banks-in-new-zealand-past-and-present
Thus I don't think a competition probe is likely to lead to much change. Instead making a few key changes could be more likely to boost competition. We could start with these ones - https://www.interest.co.nz/opinion/90779/nzs-4-australian-owned-banks-dominate-our-banking-industry-and-increased-combined
I'm not sure there is plenty of competition, it's illusory. Firstly, if there was plenty of genuine competition then they wouldn't be so profitable. If banking is an industry with scale benefits, then how are NZ banks more profitable than those in Europe, UK and USA? Second, I don't believe any of the Australian banks really want to grow their lending market share in NZ - ROE and ROA sure, but not dry lend. They will toggle rates at the margin, but no one has the risk appetite to go and buy market share. So it feels like a cosy oligopoly. None of the 4 are insentivised to compete away profits.
If you have a mortgage with one of the big four there's nothing stopping you from shifting it to Kiwibank, TSB, SBS, HSBC, or The Co-operative Bank. They all offer 'em, as do the Chinese banks...My point is the big four don't retain their marketshares simply because there are no other banks for customers to take their business too.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.