Govt to act on Commerce Commission report to boost bank competition

"The report highlights that the big four banks in New Zealand are highly profitable compared to their international peers, lack innovation, and do not aggressively compete for customers," said Minister Willis.

The New Zealand Government has committed to acting on all 14 recommendations from the Commerce Commission’s final report on bank competition, Finance Minister Nicola Willis and Commerce and Consumer Affairs Minister Andrew Bayly announced today.

The Commerce Commission's report confirmed long-standing concerns about the lack of competition in New Zealand’s banking sector, describing it as an uncompetitive, two-tier oligopoly that fails to adequately serve Kiwis.

"The report highlights that the big four banks in New Zealand are highly profitable compared to their international peers, lack innovation, and do not aggressively compete for customers," said Minister Willis. "Instead of genuine competition, what we see is more akin to a ‘cosy pillow fight,’ where profit margins are prioritized over the needs of everyday Kiwis."

The consequences of this lack of competition are stark. New Zealand bank customers face higher prices, fewer choices, and poorer service, even compared to customers of the same parent banks in Australia. "This is simply unacceptable," Willis stated. "Our Government is committed to injecting genuine competition into the banking sector for the benefit of all New Zealanders, and we will respond urgently to all 14 of the report’s recommendations."

One of the key steps involves strengthening Kiwibank to become a more disruptive force in the market. "I share the Commerce Commission’s vision for a stronger, more disruptive Kiwibank. I want it to have the growth capital it needs to become a ‘maverick’ that exerts real competitive pressure on the big four," said Willis. She has instructed Treasury to explore options for raising new capital for Kiwibank, including from KiwiSaver funds and other New Zealand investment sources, with proposals to be presented to Cabinet by December.

The report also calls for the Reserve Bank to place a greater emphasis on competition. Minister Willis has pledged to issue a new Financial Policy Remit this year, clarifying the Government’s expectation that the Reserve Bank supports a more competitive banking sector through its policies and actions.

Commerce and Consumer Affairs Minister Andrew Bayly highlighted the Government's swift response to the report's challenges. "We have already scrapped the overly prescriptive affordability regulations in the Credit Contracts and Consumer Finance Act, making loan processing easier and faster for Kiwis," Bayly noted.

Furthermore, the Government is progressing with the implementation of ‘open banking,’ which is on track to meet the timeline recommended by the Commission. "Open banking will enable Kiwis to access services tailored to their needs and create opportunities for innovative start-ups to challenge the dominance of the established banks," Bayly said. "We agree with the Commission that open banking has the greatest potential to promote ongoing disruptive competition in the medium to long-term, and we are committed to facilitating its rapid adoption."

The Government’s actions are set to bring significant changes to New Zealand’s banking sector, ensuring that competition drives better outcomes for consumers and contributes to the broader goal of rebuilding the economy.