Banking sector inquiry: Government has no immediate plans to inject more capital into Kiwibank

The Government has no immediate plans to inject capital into state-owned Kiwibank to make it more competitive with the big four Australian-owned banks.

Announcing the Government’s decision to direct the Commerce Commission to investigate the competitiveness of the personal banking sector, Finance Minister Grant Robertson said there wasn’t a timeline for when the Crown would put more capital into Kiwibank.

Its assets make up less than 5 per cent of the New Zealand banking sector’s assets.

Kiwibank’s need of capital to enable it to both scale up and meet regulatory requirements is well known.

This was a key issue the Treasury considered as it advised the Government before it last year bought Kiwibank’s parent, Kiwi Group Holdings, from NZ Post, the Accident Compensation Corporation and the NZ Superannuation Fund.

“Kiwibank’s ability to be a disruptor bank depends not just on the quality of its systems and processes and the way it marshals its resources - human, capital and other - but also the total financial resources available to it,” the Treasury said in a November 2021 report.

The Super Fund was interested in increasing its shareholding in Kiwi Group Holdings provided it had the flexibility to introduce private sector capacity and governance capabilities and could exit the investment in the future. Its proposal didn’t satisfy the Government, which wanted Kiwibank to remain completely publicly owned.

As the Treasury weighed up the Super Fund’s proposal, it recognised it would see Kiwibank “adequately” capitalised to “enable the scalability it needs to be a genuine competitor in the banking industry”.

The Treasury acknowledged that if the Crown bought Kiwi Group Holdings outright, “ongoing capital requirements… would fall on the Crown… and compete against other Budget priorities”.

Asked whether he believed Kiwibank was a “disrupter” bank, Robertson responded, “that’s the reason it was set up”.

He noted one of the reasons the Government bought it outright was to help it “continue” playing that role.

“Sometimes it’s played that role, sometimes it hasn’t. But there is scope there.”

Robertson didn’t want to be drawn into a more detailed discussion on capital, citing commercial sensitivity.

However, he said commentary around Kiwibank shouldn’t take away from the systemic issues in the banking sector, which he hoped the Commerce Commission’s market study would address.

The country’s largest bank, ANZ, has a mortgage book more than four times the size of Kiwibank’s, and a business loan book six times the size of its Kiwi competitor.

Robertson recognised ANZ, ASB, BNZ and Westpac made up around 85 per cent of the lending market, and held a 90 per cent share of total bank deposits.

National Party leader Christopher Luxon said he hadn’t thought deeply about Kiwibank’s ownership and capital requirements, but said National’s policy was to not sell state-owned assets.

Jenee 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.