KEY POINTS:
ASB Bank has set aside $1 billion for low-interest loans to small and medium businesses and farmers to help them save and create jobs.
It says the move will reduce its profits, and is calling on other banks to follow its lead.
The bank said the fund would
enable businesses to borrow at "below market rates" if they could show the loans would create employment, or prevent people losing their jobs.
The initial interest rate is 5 per cent. Chief executive Charles Pink refused to say how much of a discount it was on current rates, but said it was "multiple percentage points" lower.
Businesses will need to meet ASB's normal business lending criteria and demonstrate the employment benefits of their proposal.
"It is our practical contribution to saving jobs in an unprecedented economic environment," said Mr Pink.
The "concessionary" rate would affect ASB's profitability, Mr Pink said, "but obviously we are still looking after our shareholders".
"There is a balance between profitability and the needs of customers and the community. I guess we've just swung that balance towards the needs of customers and the community."
ASB has moved to seize the moral high ground in the competitive banking business by announcing the fund days before the Government's jobs summit on Friday.
Prime Minister John Key welcomed the plan as "just the sort of creative private sector idea I have been seeking in the lead-up to this week's jobs summit".
"As I've said many times, the summit is not only about what the Government can do. It will bring together people at the coalface of the economy who can make a real difference as we navigate these difficult economic times."
Mr Pink said ASB hoped to gain market share from its move, but wanted its rivals to make similar concessions to businesses.
"Obviously it's up to them but I think we all need to do our bit in tough times."
New Zealand's largest bank, ANZ National, last week said it would extend $4 billion in new loans to businesses and farmers this year, in line with new lending levels last year.
It said it was responding to the perception that it and other banks were lending less because of funding constraints.
Mr Pink said he and ASB knew of that perception,
but ASB Bank's business and farm lending had increased by 9 per cent in the year to December.
"We're a strong bank and we have the funding," Mr Pink said.
Any slowdown in business lending was a demand issue.
"Customers have not felt that they're able to borrow and that's what we're trying to address here by giving them a concessionary rate."
Massey University's head of banking studies, David Tripe, said the move was "a nice gesture", but he questioned how much of the $1 billion the bank would end up lending under the criteria it had set.
As well, one of the big challenges facing business was a general loss of confidence.
"Chucking money at things doesn't resolve that confidence issue.
"This is a good way of getting some attention in the market. It's good PR in the lead-up to the jobs summit and if it works all well and good, but I won't be surprised or alarmed if not much happens."
The bank also announced a "job creation term deposit" which will offer the same rate charged to "Job Creation Loan" borrowers. But the amount of lending to businesses under the offer is not tied to the amount of money raised in deposits.
* The scheme
Loans are for a minimum of $100,000 and a maximum of $10 million.
The initial rate is 5 per cent fixed at the time of approval, and will apply for a two-year term.
Borrowers must demonstrate that the loans will create or save jobs.
They must be fully drawn within 60 days of being approved.
The rate on loans and on the bank's "Job Creation Term Deposit" will be reviewed weekly.
New customers as well as existing ASB customers can apply.
Loans are available only to existing businesses for new lending, the offer does not allow the refinancing of existing loans.
