Perception is a funny thing isn't it? In offering Kiwibank $100m, the Greens argue that the banks in this part of the world are the most profitable on the planet - which is true.
I have said this many times because it is a good thing.
You want the banks to be profitable. Why? Because (a) it shows they know what they're doing when it comes to lending practices and (b) as a result in tough times they remain solid, unlike so many other banks around the globe that either fell over, get bailed or spend their days now being stress tested - with a constant nervousness around the result.
During the Global Financial Crisis fallout, our banks were solid as a rock. Surely that's what we want from our banks.
The Greens see all this backwards. Profitability is a good thing, not something to be attacked. But what about the $100 million? The first question I have is what does it get us? Does it give the Government the right to dictate how the bank operates
in telling the bank to pass on all OCR cuts? Does it tell them not to pass on increases when the come - as they inevitably will? Does it means the Greens run the bank and does that mean the Greens know more about banking now than the banks do?
In letting them keep profits to grow, how much of the profits and for how long
and given the other major banks have very deep pockets - and given we already have a fiercely competitive banking market - is this a race to the bottom? If it is, how on earth do the Greens and their $100m hope to even begin to compete.
Don't get me wrong, there is an issue around banks passing on OCR cuts, and banks need to play their role in a community, especially given they already have a bad enough reputation, but Andrew Little's idea of legislating - and now the Greens idea of handing out cash - are not answers.
And here's your other irony, all this comes at a time where we have interest rates as low as they been in a couple of generations. You can get money with a 'three' in it. You can negotiate loan rate deals. The banks are falling over themselves for your business.
The banks profitability in part is due to the amount of money they are lending and they are lending a lot because were in a successful, robust economy and also because their loan default numbers are way down.
In other words we're doing well and when we do well, buisness does well and that includes the banks.
Debate on this article is now closed.
