Prime Minister Christopher Luxon said today that Cabinet intended to implement all 14 of the Commerce Commission’s recommendations.
The Commission’s report into the banking sector in August this year found the banking sector was uncompetitive and New Zealanders not well-served by it.
Luxon said it meant there was “little strategic differentiation, and growth targets that focus on maintaining market share and protecting margins and profitability”.
“This means there is limited investment in innovation, muted competition between the banks, and poor service for some demographic groups – and frankly, that is not good enough.”
In a statement, Finance Minister Nicola Willis confirmed Kiwibank’s parent company Kiwi Group Capital had been directed to talk – along with the Treasury – about a potential investment of up to $500 million from domestically-based KiwiSaver funds, investment institutions and professional investor groups.
This would take the form of an asset capitalisation, not an asset sale, “as all funds raised would be for Kiwibank’s future business growth”.
“I want to see banks fighting tooth and nail for Kiwi customers,” Luxon said, “and this is the first step in achieving that vision.”
Willis – who was also at the post-Cabinet briefing – said the government was not considering selling any of its Kiwibank shares, and no public share offering would be made by the government until after the next election in 2026, if at all.
“I’ve been advised that Kiwibank would not be in a position to consider the possibility of a public offering until it has completed its current digital transformation project which is not scheduled for completion until 2028.”
She said institutional investors would likely want an exit option, which could take the form of investors having the option of selling shares back to the Crown “at an independently assessed, fair value”.
Luxon said the other recommendations were focused on three broad categories, which included:
• Accelerating development of open banking
• Removing regulatory barriers for entering the market
• Expanding and putting more power in the hands of customers
Willis said she had also issued a revised financial policy remit to the Reserve Bank and a letter of expectations emphasising the importance of banking competition.
She said these would outline her expectations for the central bank to prioritise:
• Expanding access to the exchange settlement system with decisions by March 2025
• Reviewing risk weighting for a range of bank lending
• Reviewing minimum capital thresholds for new entrants into the banking sector
• Reviewing restrictions on the use of the word “bank”
• Dismantling barriers to lending for housing on Māori freehold land; and
• Working with industry to make bank accounts more widely available.
“Our message to the banks is this: the time to act is now. If you drag your heels, the government is leaving open the possibility of further action. Competition is king.”
