Non-banks, banks welcome different aspects of ComCom draft report

Non-banks are pleased the Commerce Commission highlighted their crucial role in providing competition for financial services while the banks are pleased the competition regulator has highlighted the high cost of complying with regulation.

Friday, March 22nd 2024, 1:06AM

by Jenny Ruth

The ComCom released its draft report on banking competition, including 16 recommendations from the Reserve Bank better ensuring a level playing field and the Financial Markets Authority paying more attention to mortgage brokers' conflicts of interest and that the government should accelerate progress towards open banking by setting a June 30, 2026 deadline.

ComCom also wants the government to give Kiwibank more capital to allow it to become a “maverick” disruptor of the four major banks as well as reviewing legislation such as the Credit Contracts and Consumer Finance Act (CCCFA) and the Anti-Money Laundering and Countering Financing of Terrorism Act (AML/CFT Act) which hamper competition.

“We are pleased to see the commission recognises the significant impact regulation has on consumers,” said New Zealand Banking Association chief executive Roger Beaumont.

ComCom chair John Small said it is “certainly true that there has been a lot of expenditure going into that category,” but he also said that the banks have under-invested in their core banking systems, and called that a sign that competition is lacking.

Beaumont promised the banks would provide “constructive feedback” on the draft report and its recommendations.

The Financial Services Federation (FSF), which represents 97 non-banks including UDC Finance, Avanti Finance, Toyota Finance, Harmoney, MTF, and several credit unions and building societies, said her members play a crucial role in providing competition and innovation for Kiwi consumers.

"The report rightly highlights that without sufficient competition and disruption in banking services, including personal lending, New Zealand runs the risk of consumers missing out,” FSF chief executive Lyn McMoran said.

"It is vital that New Zealand's responsible non-bank lenders are empowered to fill this gap, not incorrectly viewed as "lenders of last resort", but are recognised for their entrepreneurship, agility, innovation, the competitive edge they provide, and their contribution to the economy," McMoran said.

The FSF particularly wants the recommendations that would ensure “a level regulation playing field” between banks and non-banks and to accelerate open banking.

Westpac and Kiwibank both said they would be providing ComCom with feedback while ASB chief executive Vittoria Shortt said that it's important to consider both the benefits and potential downside to any change.

“The stability of the financial system and protection of customers' funds and information will be important considerations, alongside the competition dimensions outlined in this report,” Shortt said.

Tags: commerce commission