Special Debates — Report of the Finance and Expenditure Committee—Inquiry into Banking Competition

I move, That the House take note of the report of the Finance and Expenditure Committee on the inquiry into banking competition.

The Finance and Expenditure Committee (FEC) released its cross-party inquiry into banking competition in August, following a year-long parliamentary select committee process in collaboration with the Primary Production Committee. I want to acknowledge my National Party colleagues on FEC—in particular, deputy chair Ryan Hamilton, economist Dan Bidois, and accountant Nancy Lu for their commitment to the task and consistent hard work. I want to also acknowledge former FEC members, previous chair Stuart Smith and deputy Catherine Wedd, for their leadership in scoping up the inquiry’s terms of reference from the outset in those critical first six months. Can I also acknowledge my National colleagues on the Primary Production Committee who dutifully attended all of our meetings and hearings: Suze Redmayne, Miles Anderson, and Mike Butterick, all of whom are real farmers.

With a focus on banking services pertaining to the business and rural sectors, our report back was published exactly a year after the Commerce Commission’s market study into personal banking services. Our report contains 19 key recommendations to Government agencies, financial regulators, and financial entities, including retail banks, to enhance competitive practices in the banking sector. As chair of the Finance and Expenditure Committee, I pushed hard for cross-party consensus where it was possible—and for 14 out of the 19 recommendations, that was achieved. Political consensus on most recommendations is important because it will help keep the pressure on the regulators and banking sector, as will our insistence on six-monthly updates on progress.

Several developments have been announced since the committee initiated our high-profile inquiry, at the finance Minister’s request. Many things are now in play. The Reserve Bank has conducted its review of capital requirements for banks, and expanded access to the Exchange Settlement Account System—ESAS—for non-bank financial institutions. The four big banks now need to make sure their open bank systems meet new statutory requirements by 1 December. Kiwibank’s parent company has been given the green light to raise up to $500 million to help it grow. More recently, it is pleasing to see the Reserve Bank is setting up a financial policy committee (FPC). As the Reserve Bank publicly acknowledged last month, its new FPC follows our inquiry’s recommendation that it should set up a prudential policy committee. The Government had 60 working days to respond to our recommendations, in writing, and its response is imminent and will be available on the parliamentary website soon. Again, every six months, the committee will invite the relevant entities to report on their progress towards implementing our recommendations. This is critical in tracking progress and holding the entities to account going forward.

Our deputy chair, Ryan Hamilton, is on leave but has asked me to relay some of his comments today: “The banking inquiry was an excellent opportunity to bring all the banking players to the table and to really analyse and put pressure on all the varied components within the ecosystem to really test and see how and where we can make this all work better for Kiwis. Our recommendations touch on a whole ecosystem: from the banking sector, to the Financial Markets Authority, to the Reserve Bank, to Māori lending, and to open banking and Government regulation. We sought advice and guidance from fintech start-up operators who are keen to maximise the opportunity that lies right now within reach and to disrupt the landscape of banking in New Zealand.”, writes Ryan Hamilton.

Finally, committee members are grateful for those who took the time to share their insights and experiences, including the 216 organisations and individuals who appeared before us, including the chief executives of the big banks. Thank you also to our independent specialist adviser, Murray Sherwin, and to the officials—particularly the Treasury officials—and the committee staff and the Clerk’s Office, who supported the inquiry’s work. Thank you.

Thank you, Madam Speaker. I’m grateful to have this opportunity to speak about the banking inquiry and to focus on the rural banking section of that inquiry. I want to thank the members of the two select committees for their diligence over the many months that the inquiry took place, and I also want to thank the large number of submitters for their submissions on the integrity of our banking system.

The Primary Production Committee sought to understand the challenges faced by rural customers, the impact of regulatory change, and the role of banks in supporting sustainable rural prosperity. We concluded that improvements were required, and our key recommendations are that the Reserve Bank immediately cease capital increases for banks; that the Reserve Bank review rural lending capital requirements; that the Reserve Bank require banks to have formal disclosures of factors used to calculate loan rates; and that the Reserve Bank require banks to have greater clarity around natural hazard and climate-related disclosures. There are also a number of recommendations in the body of the report aimed at making rural financing more straightforward and transparent for all.

What do these recommendations mean in practice? Well, in 2019, the Reserve Bank reviewed the capital requirements that banks must adhere to and elected to begin a series of incremental increases over a period of five years, beginning in 2022. This meant that the banks had to hold more capital for rural lending than for residential lending. Since these capital requirement changes, rural lending growth has slowed relative to other sectors, and interest rate margins on rural loans have widened compared to residential lending. Submitters told us that the level set by the Reserve Bank has hindered lending to business and agriculture. For example, ANZ’s lending to business, agriculture, and institutional sectors totalled 28 percent of loans in 2024, compared to 42 percent of loans in 2015. The Reserve Bank reports that the new capital requirements have added between 0.91 and 1.17 percent to rural loans, which is adding between $515 million and $712 million in rural interest repayments annually—money that could be spent on the farm or in local communities.

Furthermore, we note that the Reserve Bank expressed that it had concerns that banks may be using the capital review as a cover to expand rural lending margins to an unreasonable degree. Although the Reserve Bank have these concerns about banks accelerating implementation of capital requirements, we see no evidence that this is being monitored. While the Reserve Bank was incrementally raising capital requirements, the banks, it would seem, went to the maximum from the outset.

Transparency in lending practices was also a significant concern for rural customers. Many submitters noted that loan terms, rate-setting methodologies, and risk assessments are often opaque, leaving borrowers uncertain about the fairness and competitiveness of their banking arrangements. Our recommendation for improved disclosures and communication is designed to address these concerns.

Another issue raised by submitters relates to natural hazard and climate change disclosures. There is currently no standard practice employed by banks when making these assessments, and borrowers are unaware of what steps are available to them to reduce their risk and the margin imposed on them. These steps need to be clearly articulated so that borrowers can take appropriate actions, if practical, to reduce their interest rates.

In summary, these findings and recommendations offer a pathway to a more resilient, transparent, and equitable banking system. Such a system will support our primary producers, rural businesses, and the communities that form the backbone of our nation. It is vital that regulators, financial institutions, policy makers, and rural advocates work together to implement these recommendations. By doing so, we can ensure that rural Kiwis receive fair, transparent, and accessible banking services, both now and in the years ahead. Thank you very much.

Thank you, Madam Speaker. It’s my pleasure to take a call to rise on this report of the Finance and Expenditure Committee on the inquiry into banking competition. I’d like to acknowledge colleagues from all around the House who took part in this inquiry. I think it is important that, as parliamentarians, we do come together to consider issues as important as this, and I think it was important that we had the two select committees—the Finance and Expenditure Committee, joined by colleagues from the Primary Production Committee—to consider these issues, because these were issues that cut across the work of both committees.

It is so important because New Zealanders, rightly, have always expected banks to serve the public first, not as distant profit machines but as trusted partners in our everyday lives that have a stake in a shared future with us—because when things go wrong, it is the public and the people that bear the brunt of it going wrong. Banking requires active, real-time supervision and oversight to prevent problems before they escalate. Public trust has to underwrite that private profit. It is absolutely critical that we have the public trust in our banking system, and it comes with a public responsibility to safeguard stability, fairness, and access for all New Zealanders. That, fundamentally, is what lies at the heart of a successful banking system in any country, because banking systems cannot be built to favour the interests of a powerful few while families, homeowners, and small businesses are left looking for fairer treatment and genuine choices.

The inquiry presented us with an opportunity, as parliamentarians, to look at these fundamental questions and the challenges before us. On this side of the House, in Labour, we supported the inquiry because competition and accountability and banking are matters of significant public interest. They are things that the public expect us, as parliamentarians, to be questioning, to be making sure that they are serving the public interest. We can engage constructively with evidence from Treasury’s recommendations seeking to identify where consensus could be reached.

The chair of the select committee has identified that we did manage to find consensus on a number of the recommendations, but it is fair to say that there were some that we did not, and that is not unexpected; after all, we come from different worldviews, carry different values, and approached this inquiry from our belief set. I think what I would like to have seen more is more engagement from Government MPs on some of the Opposition proposals. I think that’s how we can strengthen further inquiries like this as they take place at select committee and provide platforms for genuine bipartisanship, and to build that up. When we embark on these inquiries, it shouldn’t be a matter of who has the voting numbers on a particular select committee; it is an opportunity for us to have genuine multipartisan engagement across ideas, and to allow that to happen.

But despite this, the inquiry has serviced some shared priorities that warrant further attention and provide a useful place for us, as a country, to consider our banking system. The Commerce Commission, obviously, had been looking at things and had found that the New Zealand banking market is two-tiered: there’s the big four banks who dominate, especially when it comes to mortgages, and Kiwibank stands as our only meaningful homegrown competitor. Now, when it comes to Kiwibank, it is fair to say that, as the member of Parliament for Wigram, I hold a very strong view about Kiwibank and the place that it holds in our country. It was the life’s work of my predecessor Jim Anderton to establish that bank and to make sure that we could have that genuinely homegrown bank here for us. But what we do know is it lacks the capital to disrupt an unbalanced market, and I think that’s something that came through really clearly.

Small banks, innovators, and fintechs face barriers so high that real competition remains out of reach. Likewise, we also heard from Treasury, which found that current competition is limited, and we heard that more support for Kiwibank, greater transparency around fees and foreign exchange and changes—these are the kind of things that could put people before profit and have a banking system that is working for people.

We are concerned that we did miss some opportunities to strengthen competition in the course of this work. We could have focused on the role of Kiwibank as a public banking option and competitor. That would mean protecting Crown ownership and, for me, that is an absolute mainstay of what I believe in: protecting that public ownership of Kiwibank, keeping it there as a competitor to have competition in the market, and supporting the bank’s capacity to provide service to those under-serviced communities. We heard, very much in the course of the rural banking sector, around those under-serviced communities and the need for us to have those and to provide with systemic importance to our economy as a whole, and first-home buyers needing their support, and small businesses. These were the things that we put very much at the heart of what our considerations would be, because we do need that counterbalance to the dominant banks. We do need to make sure that we are putting that first.

Loosening the rules for the largest players and prioritising deregulation is not the way forward, as we saw it. Watering down capital protections—not the way forward; not the answer. Indeed, we’re concerned it does risk making the problem worse. Deregulation might serve the big four banks well, but it ignores the truth for Kiwi consumers, businesses, and farmers; they need more choice, fairer prices, and stronger oversight, not less. So for us, everything has to be anchored in that notion of fairness. We believe that banking is built on public trust, and that trust must be valued and it must be protected. We support strong supervision, because nobody ever wants to have their savings put at risk—and I think that is the bottom line that the committee heard over and over again, and that all members could see very clearly.

But let’s turn to some of the detail of the report. I think some of the detail that we heard around what we need to do in terms of the regulation and capital rules was an absolutely important part, and actually became a very strong focus of the report. We say no to any dilution of our hard-won capital standards. Our economy has to be resilient. Kiwis need to know that their deposits are protected. Taxpayers need to know that their money is safe. These are the kinds of things we need to put clear in there.

The rural work was really important, and I’m really pleased that the two committees did come together on this, and that we didn’t have the Primary Production Committee producing a report on banking and the Finance and Expenditure Committee producing a report, and that we could bring those strands together. Because that was, I think, a critical piece: thinking about what does banking look like throughout our country, how do we serve our regions, what is the role of fintech in here, and how do we ensure all of that is there—all while thinking about those fundamentals around accountability and transparency that creates their trust within our system.

We also looked very much at the focus of the report on profitability and competition. This lay at the heart, really, at the genesis of the report, and those clear, transparent deposit and transaction fees are something that are absolutely critical. No customers being stung by hidden charges. People have a right to understand what are the fees that they are paying for their banking system. Standardised credit information and useful comparison tools will allow us, as consumers, to feel like we are getting a better deal. It’s absolutely, absolutely critical.

What we do need to know is that we’re also looking out to ensure that Māori banking is well served. This became a critical part of the inquiry, and my colleagues will pick up on that. But what we need to do is—

DEPUTY SPEAKER: Very quickly, because the member’s time’s expired.

Hon Dr MEGAN WOODS: —make sure that we’re putting people first, and not just balance sheets, at the heart of the New Zealand banking system.

The Greens welcome this inquiry into banking competition, and I acknowledge the several members of the two select committees that participated in it. I’ve only had the privilege to sub in for some of the later sessions, and I acknowledge Chlöe Swarbrick and Steve Abel, who partook in the large majority of those.

I think most people won’t be surprised to know that the four big banks that we have—all Australian-owned—operating here control almost 90 percent of the market and that, even in the year period between 2015 and 2019, before the pandemic, they had some of the highest return on equity of all sample countries. This is really critical to underpin this debate because what we have seen is that during times where people have been expected to tighten their belts, we have seen some of the largest banks actually continuing to make record profits, which tells us that the system is not so much broken but actually working as intended.

During the report, one of the things that we evaluated and that the Green Party made really clear in our deferring view, was that we had an opportunity here to look at the role of Kiwibank and to strengthen it to continue serving the public good as opposed to simply looking at maximising profits. One of the things that we were concerned about—and this occurred during the period of the inquiry, I believe—was the flirtation with the idea of privatising Kiwibank. The report in and of itself did look at strengthening Kiwibank, instead, but we think that, actually, Kiwibank needs to be strengthened in a way that raises funds from public sources as opposed to seeking sources from elsewhere. This is key because, at the end of the day, Kiwibank must remain State-owned and must actually be strengthened to ensure that its focus is on serving communities that have previously not been adequately well served by other big banks.

The other thing that I wanted to touch on is that it was concerning to see in the report that the committee recommended making it easier for overseas banks to operate in New Zealand as a primary solution to improve banking competition. What we’ve already seen is existing banks making, as I said earlier, significant profits. And the problem, particularly with the Australian-owned banks who hold the large majority of the market here, is that those profits end up being taken offshore. Opening the door to overseas banks simply as a way to increase competition risks that—

Simon Court: It would be terrible if Fonterra brought profits onshore, wouldn’t it?

RICARDO MENÉNDEZ MARCH: —being taken offshore. I couldn’t really understand Simon Court’s incoherent rambles, but whatever they may be, I hope that he focuses on that in his remarks.

Also in our differing view, we touched on the fact that the Reserve Bank should instead be focused on lowering barriers for local banks, including community, iwi, and not-for-profit trust banks to offer a broader range of banking services. Only through the expansion of those not-for-profit banks and community banks will the system better prioritise the needs of Māori, rural New Zealanders, disabled people, and the public generally because there are communities that large banks simply choose to not prioritise. So it is important that we treat banking services as a public good. This is why, once again, we reiterate—

Andy Foster: That’s right.

RICARDO MENÉNDEZ MARCH: I’m really glad to see New Zealand First saying that. It’s really interesting to see New Zealand First, for example, talking about banking being a public good in the heckles just now, when we have seen New Zealand First continuing to undermine the potential for banks to make independent decisions that genuinely centre the public good—and their “anti - woke banks bill”.

Andy Foster: You’re just misrepresenting it.

RICARDO MENÉNDEZ MARCH: I hear the member say that I’m misrepresenting it, but I remember sitting at the committee stage and hearing from submitters completely slamming the bill that he’s presented. I think this inquiry had the opportunity to centre the public good at the core of its business. But instead, I think what we have seen are some worthwhile recommendations that have been made by the committees and some of them I do think should be taken up by the Government. But overall, we have seen an over-reliance on overseas players increasing competition and assuming that as a result that will benefit our communities. We saw it, actually, in some of our previous debates today in relationship to supermarkets and we’re seeing it again today when it comes to banks.

The Green Party will continue pushing for banking services to remain a public good, to strengthen Kiwibank and keep it as a State-owned service and for Kiwibank to be enabled to genuinely reach to the communities that it has not been able to do so before.

Thank you, Madam Speaker. Look, it gives me great pleasure on this Thursday afternoon to rise on behalf of ACT and talk in this special debate on the banking inquiry. Yes, look, it was a unique inquiry bringing together two select committees. Again, obviously, we’ve already heard some contributions, but I also want to acknowledge my great farming colleague Mark Cameron, who is the chair of the Primary Production Committee. This topic was very close to his heart. He’s been very passionate about rural banking issues for a long time. I know he’s bullied his other committee members on the Primary Production Committee with his passion, and I know that they came on board because they also saw it as a very important topic. So it was great to bring these two committees together.

I do actually have to acknowledge Cameron Brewer. It was, at some times, a bit like trying to manage a three-ring circus, because you did have lots of competing interests. But I do think we actually did a very good job in the end, over the year, bringing it together. Again, I would encourage people to pick up the report, the recommendations are upfront. It’s quite logical to follow.

Look, I also want to focus on the fact that over 73 percent of the recommendations were actually agreed unanimously. Despite what the last speaker from the Greens said, I think that’s actually a real credit to where we could actually find that common ground. I want to acknowledge members from across the House that are on the committee, because we actually had some really great discussions, some robust discussions. In the end, we actually did find a way to get—as Mr Brewer said, 14 of the recommendations were unanimous of the 19. So I think that’s really, really important.

As I said for my colleague Mark Cameron, he was really driving some quite probing questions around this fairness for banking for rural New Zealand. It was great. We had a lot of—obviously, the big banks came in; they actually came in more than once. So again, we should acknowledge their time, and of all the submitters that came before our committee. One of the things he was very focused on, and, in fact, the report makes a very specific mention of this where it recommends, “We recommend that Reserve Bank requires banks to provide greater clarity around interest rates connected to any natural hazards, climate related disclosures, and green lending products.” Mr Miles Anderson, who spoke earlier, referred to this. But really, what Mark Cameron was driving at when he was asking questions around those issues is about transparency. We just need lenders, particularly rural lenders, to understand what is contributing to the costs when they are borrowing and lending money. So it was good to get that recommendation on the record.

The other thing which I was really pleased about—and again, Mr Brewer talked about this, part way through our inquiry—was that the capital requirements reviewed by the Reserve Bank were announced. Again, we obviously acknowledge that in the report, but that would have been a recommendation, but I think the Reserve Bank had, obviously, been closely following the inquiry and decided to act on their own, which was great.

The other thing that I thought was, again, really important is we actually have evidence that there’s so much innovation, actually, in the financial services area. Yes, while a lot of New Zealand banking systems at the moment are dominated by four big banks and Kiwibank, we actually had evidence that that is changing over time and you’ve got a lot of more innovative niche players coming up. Again, some of the recommendations in this inquiry needed—we’ll support those players as they start to come through. We talked about open banking. We’ve touched on capital requirements, our access to the Exchange Settlement Account System and other things that can be done, because we actually want to get more of that innovative product. So rather than—of course, I’m from ACT so you’d expect this—the State stepping in and taking over banking, we actually just want to make sure that we can get more innovation and unique products.

The other unique thing—and again Mr Brewer did touch on this, but I do want to highlight it—is at the end of the recommendations, is the fact we’re actually going to follow up on this report. Both the Finance and Expenditure Committee and the Primary Production Committee have undertaken to get some of the significant organisations, Government ones, back in to discuss the report at regular periods. I hope we can also extend that invitation to some of the other players in the sector, the banks and other financial services institutions. So it’s not just a report that’s one and done; we will be putting this into our work programme, and we look forward to following up on it and actually making this continue to live. Thank you, Madam Speaker.

I rise on behalf of New Zealand First for the report of the Finance and Expenditure Committee on its inquiry into banking competition. I congratulate the chair and members of the Finance and Expenditure Committee on some very helpful recommendations, and collegial and at times very robust discussion. That’s a good start. The whole purpose of this is to increase competition. The Commerce Commission highlighted a complex regulatory environment, high compliance costs, high capital requirements, and constraints on open banking as barriers to entry for new banks and fintech in our banking sector. New Zealand First, then, is pleased therefore to support the inquiry recommendations, standardising credit information, and supporting open banking. It should not take two to three months, online or over on the phone, where consumers are subject to forensic examination by the banks, to get a mortgage. Further, real-time payments and easily switching service providers should already be with us, and they are not. We await progress on these fronts.

Regulatory improvements: the committee has made some recommendations about streamlining the institutional arrangements surrounding Government-owned financial regulators and Payments NZ. This is interesting. Payments NZ will be asked to support new entrants into the banking sector. Payments NZ governs New Zealand’s core payment systems, setting rules and standards for financial transactions.

Hon Dr Duncan Webb: Who owns it?

Dr DAVID WILSON: It is owned by the banks themselves. Hmm!

Welcoming new competition: there may be a bit of work to be done in that regulatory environment. [Looks through notes]

Hon Members: Dramatic pause.

Dr DAVID WILSON: Oh, I have made a pause.

Regulatory improvements: the committee has made some recommendations about streamlining these institutional arrangements, and the capital requirements are fabulous.

Todd Stephenson: Aw! I mean, that’s unnecessary.

Dr DAVID WILSON: Thank you, Todd, for mentioning that. Also, I think the exchange settlement account system is a good step in the right direction. Therefore, we are really pleased that the Exchange Settlement Account System (ESAS) has started—but there lies a problem. One of the core responsibilities of the Reserve Bank of New Zealand (RBNZ) is to keep our banks safe and secure. Well, I can say that the RBNZ has been particularly successful in this endeavour, so much so that we now have a safe, secure, and cosy oligopoly.

To that end, I’ll give you two key performance indicators for us all to gauge the success of this inquiry in the long run—because after all, that’s what we’re dealing with. We’re dealing with this structural anti-competitive banking sector, where just under 90 percent of the bank’s assets in this country are owned by the four Australian banks and just under 7 percent by our challenger, the Kiwibank. Doesn’t matter which way you look at this, whether it’s the home-loan market, it’s the same answer. This structural inequity has been with us for over a decade. These banks have been in the upper quartile of profit, no matter which way you look at it, for that period of time. This is interesting and this is what lies ahead of us. These pie graphs represent a structural anti-competitive banking sector.

It has been said that a strategy without execution is an hallucination. Likewise, a report with a series of helpful recommendation needs Parliament support to action it. We do commend this inquiry to the House. It’s a good start, but there is more work to be done.

Thank you, Madam Speaker. I stand for Te Pāti Māori to speak to the report of the Finance and Expenditure Committee on its inquiry into banking competition. In just five years, Māori have lifted our contribution to GDP from $17 billion to $32 billion, increasing our share of the national economy from 6.5 percent to nearly 9 percent. Our collective Māori asset base has surged from $69 billion to $126 billion. That is an 83 percent increase—please note that, Andy. Not bad for people who make up just 20 percent of the population.

Andy Foster: There are a few settlements in there.

MARIAMENO KAPA-KINGI: Hardly settlements; there’s no one settled. Anyway, I’ll just speak to you, Madam Speaker. These facts matter.

This inquiry was launched to investigate whether the banking services in Aotearoa are fair, competitive, and accessible. What it exposed were longstanding challenges—ones that Māori, that rural communities, and that small businesses face every day when just simply trying to open accounts, secure loans, or access fair banking services. The reason is clear: a small number of large banks dominate the market, supporting the kōrero of Dr David Wilson just to my left. For te iwi Māori, though, these barriers cut even deeper. Current banking frameworks simply do not fit our realities—particularly for Māori land trusts and collective ownership structures. That is why recommendation 17 of the inquiry is critical. It calls for the removal of unnecessary anti - money-laundering compliance barriers for land trusts. These regulations, though well intentioned, have resulted in punishing Māori for owning land collectively. It becomes arduous to open accounts, to borrow, and to grow.

That’s not just a regulatory flaw; it is a justice issue. Removing barriers is only the first step. Once Māori are free to participate, the system must also adapt to reflect Māori ways and thinking and Māori ways of doing business. That is where recommendation 19 comes in. It calls for Māori-focused lending products—lending that understands our land tenure, our intergenerational ownership, and our collective stewardship: our whakapapa, our kaupapa, our tikanga. If we want growth that lasts, we cannot keep forcing Māori into one-size-fits-all financial models built for someone else’s economy.

If Māori-focused products are created, we must also guarantee that they are delivered to a fair standard. That is the purpose of recommendation 16, which proposes voluntary service standards for Māori banking. Voluntary is a start, but voluntary isn’t enough. We require partnership and co-governance—I’m going to say that again, because I know not everybody really digs that word, but you’ll get used to it: co-governance—where Māori financial experts, iwi leaders, and Māori businesses set the standards, monitor compliance, and hold the sector to account. True partnership under Te Tiriti o Waitangi means Māori must take a role in shaping the standards, not just to follow them.

With the foundations of recommendations 16, 17, and 19 in place, recommendation 18 will become the natural next step. This calls on the Crown to enable Māori co-investment in infrastructure. Māori have proven that we are not bystanders in this economy; we are partners in the future growth of this whenua. If there is any call for a reset that actually produces effective change, it must do so to the system. We are a people ready to elevate economically to the next stage, so I look forward, and we look forward, to seeing how the recommendations are given effect to in the coming months, and how people can grow in this space. Tēnā koe e te Pīka. Tēnā tātou.

I rise to speak about the inquiry into banking competition as a member of the Finance and Expenditure Committee—an inquiry that matters for every New Zealander who has ever taken out a mortgage or wants to take out a mortgage in the future, started a small business, or tried to access finance, either from a rural community or a Māori community.

I have to say my thanks first, because the two select committees worked really, really hard and really well together. I thank my colleagues on the Finance and Expenditure Committee, alongside the colleagues who have spoken earlier today. I also note Ryan Hamilton, our deputy chair for the select committee, is currently on Parliament leave, but I join him to acknowledge the former chair Stuart Smith, who did a great job in kicking us off in the entire inquiry. And I acknowledge the current chair, Cameron Brewer, who navigated some challenging times and ensured that we had as much bipartisanship across select committees and across the parties as we could, and landed on really good recommendations across all sectors.

I do also want to thank the Primary Production Committee for their constructive, cross-party work, our clerks and advisers from Treasury and the Ministry of Business, Innovation and Employment for their rigour, and the hundreds of submitters who came in either in person or online, from banks, to fintechs, to farmers, to community groups, and from individuals—for their honesty and their insight. As one rural business owner told us during her submission, we don’t want sympathy; we just want fair access to finance so we can grow our farms.

The banking inquiry matters for New Zealanders. As finance Minister Nicola Willis has said, New Zealanders deserve a banking sector that is as competitive as possible. Banking is the infrastructure for opportunity, for people to consider growing, for businesses to grow, for the country to grow. And when competition is weak, cost will rise, innovation will slow down, and ordinary people—all New Zealanders—will pay that price.

What we knew going into the inquiry was that particularly the top four of the Australian-owned banks operating in New Zealand have a huge majority of the banking sector. They manage and operate and control almost up to 90 percent of the banking market in New Zealand. That dominance stifles smaller competitors and innovators in banking and also in fintechs. Profitability remained quite high by international standards, despite our banks operating mainly in a very low-risk retail market. The Commerce Commission have also found that there was no observable tendency towards strong competition, and our select committees have agreed.

We have heard, through the inquiry period, from New Zealand households, who want fairer fees and simpler products. We have also heard from the rural communities, who want banks that understand seasonality changes and realities and challenges. We have heard from Māori organisations, who want the system to really reflect on collective ownership. And we’ve also heard from fintechs, who want regulation that protects stability without crushing innovation, and they want to deliver for New Zealanders.

So now progress is already under way. Importantly, this inquiry has delivered recommendations that we now see progress. Kiwibank has Cabinet approval to raise capital. Open banking is beginning to now roll out nationwide. The Reserve Bank is reviewing capital settings to ensure prudence but also growth, and the Financial Markets Authority has widened its regulatory sandbox so fintechs can now test their products without the needless red tape. So we are seeing green shoots—from new entrants expanding digital services, to rural lenders now starting to get some response to tailor their seasonal needs, and Māori financial situations building that capability and confidence.

Now, out of the 19 recommendations, I just wanted to highlight five—I’m conscious of time: standardising credit information so Kiwis can get easily compared loans; lowering barriers for new and overseas banks and fintechs; revisiting capital rules so smaller banks can compete on fairer terms in New Zealand; requiring transparency in rural lending risks; and developing Māori banking services standards and removing unnecessary anti - money-laundering barriers for Māori land trusts. What this means for New Zealand is better, fairer banking services that protect households and small businesses but also allow us to grow.

So, looking ahead, I’m very excited about what we have delivered for New Zealand, as Parliament as a whole and also across parties. So, Madam Speaker, I am so proud to be recommending our inquiry to you. Thank you.

This has been an interesting inquiry. As previous speakers have said, there’s a great deal that we can agree on across the House in terms of our banking sector, but there are places where we come apart and where perhaps we’re not quite so bipartisan in our approach. I want to focus on one of those in particular, and that is around climate. It’s for a very particular reason, because this is a week in which we’ve seen the Government, frankly, walk back on its climate commitments.

I want to direct the House’s attention to recommendation 9. That’s the recommendation that says that we should “Make climate lending rules clear and consistent”. It says, “We recommend the Reserve Bank develop transparent national guidelines for banks on the application of climate-related risk weighting and pricing, regarding how it influences subsequent lending practices across different sectors.”

If we go to the body of the report, there are two sections of the report that concern themselves with climate. One is the section in chapter two of the report that looks at climate-related disclosures that are made by the banks. The banks have been required to make climate-related disclosures under, I think, the Climate Change Response Act. Actually, no, it might be under the financial management—I’m not sure which Act it is. Basically, entities that have more than $1 billion of assets have to make climate-related disclosures. This is set out in this report, and that clearly includes all our banks.

In a second part of the report, in the chapter on rural lending, the views were coming through from people about sustainable loan products. Now, those are products where the banks offer a lower interest rate or discounts on interest rates for borrowers who engage in sustainable practices, especially around climate. During the inquiry, we had a series of questions from some members of the committee to submitters, particularly to the banks, which clearly, I think, contained the view that the banks were improperly engaging in the sorts of practices that led to lower rates for some borrowers because they engaged in good climate practices. It was, to my mind, a form of climate denialism. It is a place where we are starting to come apart with the Government. Now, instead of really finding that the banks were doing anything improper, what we just came up with is these guidelines around transparency. Frankly, any borrower can go to their bank and ask for how their borrowing rate is calculated. We do that all the time as we fix our mortgages again and again. I’m sure that rural borrowers can do it too.

What concerns me around the climate denialism, which was coming through from some members of the committee, is the flow-through into what this Government is now doing, and it is appalling what this Government is doing. At 8 p.m. on Tuesday night, there was dropped a whole new set of things that are going to happen around the emissions trading scheme, and it was serious. The carbon price immediately dropped by 10 percent. One of the things that’s going to happen is that climate-related disclosures, extensively referred to in this report, are going to be wound back. The emissions trading scheme unit volumes and prices are going to be disconnected from our nationally determined contributions.

Nigel Brunel, a prominent person working in climate trading, said that the unpredictability generated by that Government around climate is causing real problems for the emissions trading scheme. That Government says that it is committed to climate and committed to Paris. That’s what it says, but its actions are completely the other.

This report, looking at what the banks say, says that climate reporting is a good thing that institutions need to engage in, and yet that Government is walking back its commitment around climate. That is a Government that says something with one hand and does completely the other. I say we might think we had a bipartisan report here, but we are losing our bipartisanship on climate because that Government is not consulting us, is not talking to us, about climate, and is saying one thing and doing the other. It was great doing this report, but, dear God, we need one on climate. [Interruption]

Just before I call the next member, I want to remind members that interjections are fine, but that was a barrage, and I don’t want to hear that again.

It’s great to restore the dignity of the debate that we’re having today. It is an honour to speak in this debate about the banking inquiry. I do just want to acknowledge my colleagues across the House, and you, Deborah Russell, in particular, for the collegiality of which we have come together across this Parliament to investigate banking competition. In particular, I just want to call out my colleague Cameron Brewer; you’re a great chair, mate. Well done. Good work. I’d also like to call out the deputy chair; we call him Ryan “Enforcer” Hamilton. He’s doing really well, and other colleagues from across the Finance and Expenditure and Primary Production Committees. Thank you to the submitters—216 of them—for your contributions to this important inquiry.

I must admit, as a new member on the Finance and Expenditure Committee I was very sceptical of this inquiry when I joined. But, like many, I have found that this will be a value-add inquiry for the outcomes that we’re seeking in the banking sector. I do think that there are real benefits for the long term in terms of greater competition, lowest possible interest rates, more innovation and better service, and a return on equity that is more commensurate with a competitive market.

I do want to just say to those listening at home: there is no silver bullet to improving competition in the banking sector, unless you want the heavy-handed Government to start regulating that prices must be a certain percentage. We’re not actually Venezuela, last time I checked; we trust in the market as the best system of allocation in financial services. We trust that Government policy is to assist in market efficiency.

That is why this inquiry has been so important, because it’s come up with, I think, 19 practical recommendations that we think will make a difference to competition in the long run. These, coupled with already lower interest rates and the lower official cash rate and Government policies already under way, as the chair has already outlined, will make a substantial difference. But this won’t be overnight.

But what did we recommend? Well, let me focus on what I thought was the biggest impediment to competition: the regulatory environment. We made three broad recommendations around improving the regulatory environment, around improving prudential settings. That is the responsibility of the Reserve Bank. Submitters told us loud and clear: they’re not doing their job properly. So that is why we recommended that they establish a prudential policy committee, which they have done already, and they’re recruiting independent members for that committee. We also recommended that they look to appoint new board members who have specific skills in the financial sector to the board and also conduct regular independent external reviews of the policy settings.

The second is around the review of the capital settings, which has already been discussed and debated. It’s great to see the Reserve Bank leading and already consulting on a raft of changes that this committee made in its inquiry to improve the capital settings.

The third area, and equally important, is cutting red tape to prevent greater innovation in this space. Red tape is everywhere in the financial services sector, as we heard loud and clear from submitters. So we urge the Council of Financial Regulators to get focused on getting rid of that red tape, streamlining processes, and getting rid of duplication. We urge Payments NZ to look at its governance model so that fintechs and other little start-ups actually have a voice at the table, and for Reserve Bank to review its definitions of what is a bank and encourage more innovation.

Change is under way. We will monitor progress in the Finance and Expenditure Committee. It is my pleasure to commend this inquiry to the House.

Thank you, Madam Speaker. What a good opportunity to be able to talk about what is a pretty remarkable report. Being able to have these special debates is a privilege for committees that have worked really hard to find consensus and common ground on these inquiries, and this is one. This is one where this remarkable report, basically, found that four big banks in New Zealand’s market are making the best part of $7 billion a year while small businesses go to the wall with big loans, while farmers have to become finance experts just to make a living, and while first-home buyers are getting locked out of the housing market.

We should have been asking the big questions about banking. We should have said that if New Zealand is the wealthy and abundant country that we want it to be, then how can ordinary people be locked out of affordable home loans and credit to grow their businesses? Why are some New Zealanders struggling to get money to build a home to raise their kids in that they can actually pay for? And if they can pay for it, why are they being hit with surprising fees and with tougher and tougher terms year after year? Why are small-business owners, like my mum, who pays more for merchant fees this year than she ever has before, still putting their houses up as security 30 years on from opening the doors? All of this, when New Zealand banks made about $7.2 billion in 2024. Those profits were up while ordinary New Zealanders were out there living through an affordability crisis, which this Government promised, at the election, they would have as their number one priority.

There is misuse of market power going on in New Zealand’s banking sector—that is agreed by all parties in this House—and it’s costing Kiwis money when they pay for their loans for their businesses and for their homes. We should have been able to address that, but what has this Government done? This Government, while the banking inquiry has gone on and while we have found common ground that we can be proud of, has tried to forgive the debts owed by ANZ and ASB to thousands of their customers. It has also regulated surcharges in such a way that people were surprised to find out that the beneficiaries of that regulation would be Visa and MasterCard, and the people who would bear the cost were the small businesses who are still going to the wall because they can’t get enough feet through the door. These are the wrong choices about banking in New Zealand.

We believe in competition too, on this side of the House. We believe that competition will serve a market that is functional for people who need banking services. But the priorities here couldn’t be more clear. We’ve heard from bank after bank that the problem here is the big bean, the Reserve Bank of New Zealand (RBNZ), who’s coming with their big regulate-y stick and have told the big, mean banks to do better loans—or something: I don’t know what the arguments were in the Finance and Expenditure Committee room; look, I’ve forgotten. But, certainly, the Government MPs were extremely influenced by that. And we’ve come out with a report that puts the blame squarely where it does not belong, in the face of evidence on which we in fact agree, which is that the margins are rising, the profitability is going up, while ordinary New Zealanders are getting a worse and worse deal.

Todd Stephenson: You agreed!

ARENA WILLIAMS: We do agree with many of these recommendations. What we certainly don’t agree with are the priorities here on display for everyone to see.

What should the Government have focused on? Top of the pops should have been Māori access to capital, and that is something Labour has been proud to work on over many years, to make it easier and easier for Māori landowners to develop homes in their land and to develop their businesses. That is important, and this was something that went by the wayside time and time again.

It should have focused on the role of Kiwibank. Let’s be clear: this is also a really important inquiry because it sets out some of the most groundbreaking common ground about Kiwibank that we have ever seen in this Parliament, which is that everyone agrees they are capital-constrained. Everyone agrees that there are capital constraints on Kiwibank and that we want them to continue to grow. So what’s the answer there? Let’s find common ground to be able to retain a public bank, so that New Zealanders can access a product in the market that competes with the Australian banks, but let’s make it possible for the bank to grow its market share. But, no, that wasn’t the focus.

Instead, we have seen some steps forward. We have seen some agreement that Payments NZ needs to be more open to the fintechs and the competitors. That will be important. That is a disparity between what Labour and the Greens believe. We are proud to be able to support the findings that more overseas entrants should be able to enter the market. That is important to the way that we see banking working for New Zealanders. So let’s press out on that, let’s not waste our time blaming RBNZ for the problems, and let’s make sure that we have room to introduce serious law that will improve the situation for New Zealanders and not waste their time by telling them that we are doing something about the cost of living while we aren’t.

Motion agreed to.

The House stands adjourned until 2 p.m. on Tuesday, 11 November 2025.

The House adjourned at 6 p.m.