New Zealand is to launch an inquiry into the state of competition in its banking sector, with a focus on service provision in rural areas, Finance Minister Nicola Willis announced today.
The move responds to concerns raised by a March draft report by the country’s competition watchdog, which highlighted a lack of competition in personal banking services offered by the country’s four biggest banks. The report also noted that the lack of investment in technology and innovation is due to banks’ emphasis on protecting profit margins.
The country’s largest banks, including ANZ Bank New Zealand, ASB Bank, Bank of New Zealand and Westpac New Zealand, are subsidiaries of Australia’s largest banks. Together they control about 85% of the New Zealand credit market, including mortgages, and 90% of the deposit market, according to official figures.
Willis stressed the importance of strong competition in the banking sector as a key component of the country’s economic recovery. Parliament’s Finance and Expenditure Committee will conduct the inquiry along with the committee dedicated to agriculture. The objective is to determine the scope of the inquiry and prepare a report focusing on rural banking services.
The chancellor attributed the decline in farmers’ satisfaction with banking services to examining the impact of banking competition on the rural economy, which is vital to New Zealand’s overall economic growth. According to a Central Bank report last year, the agriculture sector accounted for only 11% of the country’s bank loans.
As part of the inquiry, the Niti Aayog plans to invite banks to submit their observations, and the discussions may require the presence of banks’ heads and CEOs. The research aims to understand and address issues surrounding competition in the banking industry that can have significant implications for customers and the wider New Zealand economy.
Reuters contributed to this article.
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