Greens' Kiwibank stance criticised

A Green Party proposal to strengthen Kiwibank has been criticised by banking experts.

Tuesday, April 5th 2016, 12:37PM

by Susan Edmunds

The Greens have suggested a plan that would allow Kiwibank to compete more aggressively with the big four Australian banks in New Zealand, particularly in the commercial market.

They claim that more competition would drive lending rates down and pass on savings to households and businesses.

“By holding back Kiwibank’s ability to grow quickly and compete, the Government has let the big four banks make excessively large profits off Kiwis. When the Reserve Bank moved recently to cut the official cash rate by 25 basis points, three of the big four banks passed on only 10 basis points of those cuts.”

The Green Party would give $100 million for Kiwibank to move into commercial banking, allow it to keep more of its profits and change the NZ Post Group’s statement of corporate intent to make Kiwibank market leadership a higher priority.

But Claire Matthews, banking expert at Massey University, said Kiwbank should not be encouraged to go into commercial banking to any great extent.

She said it was appropriate that the bank offer some business lending to customers who had their personal banking with Kiwibank and wanted it to cater for their own small businesses, too. “To allow them to also meet those consumers’ needs is sensible.”

But she said the commercial market did not need another entrant and Kiwibank would not be likely to meet the needs of large-scale businesses.

Her colleague, David Tripe, said $100m would not go far to promote business lending.

“Especially if they are going to re-target themselves to making a lower profit by reducing margins because that’s been their major source of capital.”

He said large exporters would question whether Kiwibank had the skills to manage their business.

Arguments about the banks passing on OCR cuts were flawed because they did not take into account the fact that bank funding costs were rising, he said.

Matthews said, after 14 years in operation, Kiwibank should be in a position where it should be paying a dividend to the Government not being a drain on its finances.

Tags: Kiwibank