Nau mai, haere mai – welcome to your latest newsletter.
Last month, the Commerce Commission released the draft of its fourth market study. Having examined the grocery, fuel and building sectors in its earlier reports, this time New Zealand’s watchdog took aim at the banking sector.
What it found should come as no surprise: New Zealand’s banking sector lacks any real competition. The four major banks (ANZ, ASB, BNZ and Westpac) own almost 90% of the assets of all banks. And state-owned Kiwibank, founded in 2001 to be an industry disrupter, has not been able to consistently impose competitive pressure.
As banking expert Martien Lubberink writes, the commission deserves some praise for its efforts to highlight the shortfalls of the banking industry. But the solutions put forward in the draft report should also ring some alarm bells.
“The proposals to help smaller banks, no matter how well-intended, are concerning,” Lubberink writes. “These initiatives are reminiscent of the pre-global financial crisis era when lower capital ratios were used to boost competition and extend excessive credit to aspiring home-owners.”
Lubbering argues that trying to help weaker banks through deregulation, infusing new capital or lowering capital requirements may backfire.
As always, you’ll find a lot more to read in this newsletter and on our homepage, including a fascinating look at how depictions of Jesus wearing a loincloth on the cross get it wrong.
All the best for the week ahead, mā te wā.
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