Parliament inquiry highlights barriers smaller banks still face
New Zealand’s cross-party finance and expenditure select committee has released its long-awaited banking report, but analysts say its findings may reinforce the dominance of the country’s major players.
The committee’s inquiry spanned 13 months and heard from 216 organisations and individuals. Its conclusions closely mirrored those of the Commerce Commission’s earlier study, highlighting a profitable, stable market in which the four Australian-owned banks control around 90% of activity.
The report makes 19 recommendations, including requiring banks to disclose profits on everyday accounts, standardise lending information across customer groups, and lower barriers for overseas banks and fintechs.
It also suggested establishing a new Prudential Policy Committee to monitor the Reserve Bank’s performance and adopting voluntary service standards to better meet Māori needs. However, the committee itself acknowledged the findings were “unlikely to be a silver bullet for competition.”
Victoria University associate professor Martien Lubberink said the report did little to disrupt the existing balance.
“Even with additional equity, the risk is that Kiwibank simply scales into a smaller version of the incumbents, rather than reshaping the market. That is not disruption – it is reinforcement of the status quo,” Lubberink told RNZ.
Capital rules favouring incumbents
The report recommended the Reserve Bank stop increasing minimum capital levels, a move Lubberink argued could strengthen the position of the largest banks.
“Because they tend to run close to regulatory minimums, with little headroom beyond requirements, a halt in capital increases therefore provides them with immediate relief,” he said.
Lubberink added that smaller lenders face tougher requirements compared to the big four.
“While presented as pro competition, the effect is to shore up the position of the largest incumbents,” he said. “These recommendations reveal an uncomfortable truth – even well-intentioned reforms may entrench the very market structure they seek to challenge.”
Banks push back
Kiwibank welcomed parts of the report, saying the conclusions aligned with its call for fairer competition.
Chief executive Steve Jurkovich (pictured left) said the bank was expanding but needed stronger policy support.
“It’s encouraging to see recognition that the current capital regime may be holding back smaller banks,” Jurkovich said.
“A more balanced approach will unlock innovation and ensure Kiwis have genuine choice in banking. We look forward to the government’s review of the Reserve Bank’s capital settings and outcomes that better support competition.”
ANZ CEO Antonia Watson (pictured right) said the report overlooked the strength of existing competition, citing momentum in customer switching and the adoption of new services.
“Competition is strong. More New Zealanders are using open banking services, switching between providers is at record levels and increased transparency around pricing is reflected in more positive farmer sentiment,” Watson said.
She also defended bank profits, pushing back against the committee’s comparisons.
“It is important not to lose sight of ANZ NZ’s broader role in the economy,” Watson said. “We’re one of the largest importers of foreign capital into New Zealand, with close to $19 billion invested.”
Click here to read the RNZ report.
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