New Zealand to investigate banks

The New Zealand government announced on Tuesday that it would conduct an examination of the country’s banking sector to assess the profitability of banks and the level of competition for consumers. Currently, four banks dominate the market, accounting for around 85% of mortgage and lending activities and 90% of deposits, according to government data. While smaller lenders have seen some growth, their market share remains relatively small.

Grant Robertson, the Minister of Finance, expressed concerns about the functioning of the banking market, noting that banks have consistently reported high profits that outperform their international counterparts. The government aims to establish a more competitive environment for personal loans, mortgages, and credit cards to ensure that consumers receive the best possible deals, especially as households grapple with increasing living costs.

Robertson emphasised that the investigation would focus on competition issues and barriers faced by new entrants or expanding players in the market. The examination will also explore the introduction of innovative products and services and consumers’ ability to switch between banks. However, it will not delve into bank conduct or culture.

The government plans to complete the probe by August 2024 and will assess whether any actions need to be taken based on its findings. The New Zealand Banking Association responded positively to the announcement, stating that it would engage constructively with the government’s move. The association believes that the inquiry will address community concerns regarding competition and innovation in the banking industry.

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