She didn’t want to sell down the Government’s stake in the bank, but would consider welcoming capital from the likes of the NZ Super Fund, ACC, iwi, KiwiSaver providers and other investors. She was also open to partially floating the bank on the NZX.
Willis didn’t share a firm view on whether she wanted Kiwibank to remain 100% New Zealand-owned. Potential investors the Herald spoke to said Kiwibank shares would need to be discounted if conditions were put on them.
Willis said she would take proposals for Kiwibank’s future to Cabinet no later than December this year.
Longer term, the competition watchdog wanted to see open banking accelerated.
The idea with this is to enable bank customers to share their personal bank data with third parties, such as financial technology firms that can provide banking services – make payments, or help with budgeting, for example.
Commerce and Consumer Affairs Minister Andrew Bayly said things were on track to having open banking operational by 2026, in line with the commission’s recommendations.
The Government also committed to looking at how it could be an early adopter of open banking to drive wider uptake across the economy.
The commission watered down a controversial suggestion in its draft report, released in March, for the Reserve Bank to change its bank capital rules to make it easier for small banks to compete with big ones.
The central bank voiced strong opposition to changing these rules, aimed at preventing banks from collapsing.
The commission concluded that if the Government wanted the Reserve Bank to weaken financial stability to strengthen competition, it might need to change the law under which the Reserve Bank operates.
Willis, in an interview with the Herald earlier this month, said she was open to doing so if a strong enough case could be made.
She also previewed the announcement made today, that before the end of year, she will issue the Reserve Bank a revised Financial Policy Remit, which will emphasise the need for it to have regard for competition in its decision-making.
The hope is for this to prompt the Reserve Bank to put more emphasis on competition in the way it regulates banks and non-bank deposit takers going forward.
This could inform the design of the deposit compensation scheme, which will become operational next year.
It could prompt the Reserve Bank to give smaller banks direct access to its payments settlement system. A review of this system is underway.
A revamped remit could also push the Reserve Bank to tweak the amount of capital it requires small banks to hold for the different sorts of loans they write, and loosen restrictions preventing some entities from marketing themselves as “banks”.
ASB chief executive Vittoria Shortt, last week told the Herald that changing the amount of capital banks have to hold for different types of lending wouldn’t necessarily prompt banks to lend more to higher-risk borrowers, including businesses and farmers.
The commission said its 14-month study found “a stable, highly profitable, two-tier oligopoly with no disruptive maverick and a lack of obvious or aggressive price competition”.
Commission chair John Small said recent investigations had reinforced views competition was not working as it should in the sector, and consumers were missing out as a result.
Here is a summary of the commission’s recommendations:
Capitalise Kiwibank
- The Government, as Kiwibank’s owner, should consider what is necessary to make Kiwibank a disruptive competitor, including how to provide it with access to more capital.
Accelerate and co-ordinate progress on open banking
- Industry and the Government should commit to ensuring open banking is fully operational by June 2026.
- The Government should support open banking by being an early adopter and taking an All-of-Government approach to adopting payments enabled by open banking functionality.
Ensure the regulatory environment better supports competition
- The Reserve Bank should broaden the way it undertakes competition assessments under the Deposit Takers Act, placing more focus on reducing barriers to entry and expansion in the banking sector.
- The Reserve Bank should place greater emphasis on competition in several specific upcoming decisions.
- The Government should ensure that existing legislation and future decisions do not unintentionally favour banks, particularly larger banks, over other providers.
- The Government should lessen barriers to switching home loan providers as part of the Credit Contracts and Consumer Finance Act (CCCFA) reforms.
- The Government should prioritise competition concerns when reforming the Anti-Money Laundering and Counter Financing of Terrorism regime.
Empower consumers
- Banks should invest in making improvements to its switching service.
- Home loan providers should present offers in a readily comparable manner, accounting specifically for the effective value of cash contributions.
- Home loan providers should pro-rate all clawbacks for mortgage adviser commissions and bank cash contributions.
- Mortgage advisers and banks should make changes to promote price competition and choice for home loans.
- Industry and the Government should prioritise reducing barriers to lending for housing on Māori freehold land.
- Industry should make basic bank accounts widely available.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in Government and Reserve Bank policymaking, economics and banking.
