A banking inquiry has cross-party support, but who should lead it remains an open question, writes Catherine McGregor in this excerpt from The Bulletin, The Spinoff’s morning news round-up. To receive The Bulletin in full each weekday, sign up here.
All signs point to a banking inquiry
It set its sights on petrol prices in 2019 and the supermarket duopoly in 2022. Now the Commerce Commission seems to be gearing up to take on banking, as calls for an investigation into the sector’s profits grow. An inquiry has cross-party support – the question is who should lead it. National wants “a short, sharp, quick study” via select committee, while the government is backing a bigger (but slower) ComCom investigation. It’s not just politicians: the Reserve Bank has voiced its support for an inquiry, and the banking industry itself (paywalled) “would welcome the opportunity to discuss bank profits and the contribution banks make to support the New Zealand economy, households and businesses”.
Many issues, few easy solutions
Simplicity Kiwisaver founder Sam Stubbs has been one of the loudest voices calling for an inquiry, arguing that it should look into not only the source of those huge profits, but also the role played by Kiwibank, “a one-armed boxer in the ring with four Aussie heavyweights”. If the inquiry does happen, the Herald’s Liam Dann isn’t confident it’ll make much difference (paywalled). “I can’t see any appetite within Labour or National for giving the sector a real shake-up, so calls for an inquiry are just political theatre,” wrote Dann. His diagnosis: “We used foreign money to inflate our own house prices and super-size our mortgages. It’s made many of us very comfortable but the trade-off is we’re sending billions offshore in bank profits every year. Who’s to blame? We are, of course.”
Is a windfall tax the answer?
The Greens say a windfall tax is needed to clip the big banks’ wings. Speaking to TVNZ’s Q&A on Sunday, financial services expert Claire Matthews warned a windfall tax could come back to bite the government. “Part of the reason that [banks] make profits is to get them through the bad times,” the business professor said. “The risk is, if you take in tax what’s seen as the windfall profits, you will actually then almost have a liability to compensate the banks when they have difficult times.”
She added: “But also, how do you define windfall profits? And it is a big question to answer.”
Get ready for open banking
Part of the issue is that once a bank has you as a customer, they likely have you for life. There’s a widespread belief that it’s difficult to change banks but, as Gareth Vaughan points out in Interest.co.nz, taking your banking business elsewhere is actually pretty easy in NZ – the problem is, most customers don’t know it. The next step to making the sector more competitive will be open banking, which Duncan Greive sang the praises of last year. It allows customers to switch banks without having to switch their account numbers, just like you hold onto your phone number when you change mobile providers. Open banking – which offers a lot more functionality than just account number portability – is already the norm in much of Europe and in the UK, where it’s now used by more than 7 million customers and forms the backbone of popular ‘neobanks” like Monzo and Starling. It’s set to arrive in New Zealand sometime next year.
