The banking industry is changing the way it does business and in doing so has shown little concern for the wellbeing of the many people living in rural and provincial New Zealand.
Quite ruthlessly they are closing branches at an accelerated rate, citing economic viability and efficiency gains as reasons to justify their actions.
This is despite posting billions of dollars of record-setting profits. There has been no assessment of the effect on small businesses, the elderly, those without internet access and the social impact of these changes. These closures are causing a lot of concern and disruption.
The closures have been spearheaded by the big four banks, ANZ, ASB, BNZ and Westpac, that are collectively responsible for 85 per cent of bank lending in this country. But even the 100 per cent New Zealand-owned Kiwibank has jumped on the bandwagon with another branch closure (Gisborne) announced just this week.
Unlike the other four, they can't blame their Australian parent companies when the Kiwibank ownership comprises of Kiwi Group Holdings (KGH) that is owned by New Zealand Post (which holds a 53 per cent stake), the Guardians of the New Zealand Superannuation Fund (25 per cent) and the Accident Compensation Corporation (22 per cent).
Like many rural and provincial mayors across the country, I see this as a major concern for the people in our community. Hence three weeks ago, I had no hesitation in joining with 33 other mayors across New Zealand who wrote to the prime minister demanding an urgent assessment of these impacts and a halt on branch closures in the interim.
It's important to remember that Australian banks can only operate in New Zealand if they are registered and have a licence to do so.
The Reserve Bank is responsible for overseeing New Zealand's banking system, including the registration and supervision of banks. The Reserve Bank also administers government requirements that banks have to meet before and after they're licensed. The licence sets the terms under which they can operate and the terms and conditions can be changed.
A condition requiring banks to maintain an appropriate level of service in rural areas would compel them to retain their presence and service levels across the regions. But the Government seems reluctant to act and in the meantime, branches continue to close, or operate under massively reduced hours.
Jointly, suggestions from the 33 mayors offered a number of possible alternative solutions including suggestions local Credit Unions and Building Societies (CUBS) could step into places where Australian banks have failed NZ. Many of these organisations are very old, and have operated predominantly in the provincial areas hardest hit, providing mortgages and lending facilities.
However, a few months ago, the Reserve Bank set in place the Funding for Lending Programme (FLP), providing $28 billion of discounted long-term funding to banks. Our NZ-owned CUBS were denied access to this funding, meaning Aussie banks are decimating the lending business of these organisations. Rather farcically, they are doing it with government-approved low interest rates and making it even harder for them to continue providing services to provincial NZ.
Additional programmes denied to NZ institutions are the Term Auction Facility (banks' access to improved liquidity) and the Term Lending Facility (cheap funding to support lending).
Mayors have collectively asked Government, along with the Reserve Bank, to do the following:
· Secure access to financial services for all New Zealanders regardless of location
· Reduce the out-flow of banking profits to offshore shareholders
· Encourage the growth and viability of NZ owned financial institutions and provide level playing fields for competition
For too long NZ has complained about being a cash cow for Australian institutions but I can't help feeling slightly pessimistic about the prospect that anything will change ...