National says Government has mucked up banking competition study

Thursday, 10 August 2023

National’s small business spokesman Andrew Bayly says supporting small businesses, which are the powerhouse of our economy, is essential.

National says the Government has made a mistake by not including small business banking in its market study into competition in the banking sector.

The Commerce Commission Te Komihana Tauhokohoko has released its terms of reference for the market study into competition in the personal banking sector, which had “persistently high profitability” compared to banks overseas.

But National’s small business spokesperson Andrew Bayly said the commission should have been directed to look into small business banking, as well as home loans and term deposits.

“Lending to businesses helps to fuel the economy, and it is essential that these entities can access finance easily and in the most cost-effective way,” Bayly said.

“The growth in business lending has been under a third of that in residential mortgage lending,” he said.

“Reserve Bank data shows that while residential mortgage lending from banks has grown from around $60 billion in 2000 to $343b in 2023, bank business lending has only grown from about $40b to $120b.

Finance Minister Grant Robertson says it's 'not about bank conduct and culture' but ensuring people get 'the best deal possible'. (Video first published June 20, 2023)

“National would have extended the enquiry to include business lending. It is essential that small businesses can obtain finance on competitive terms,” he said.

That call echoes freelance economist Cameron Bagrie, who urged the Government in June to include small business banking in the terms of reference for the market study it gave to the Commerce Commission.

Bagrie pointed to the low net promoter scores for banks from small business owners compared to retail bank customers.

Data from Bank of New Zealand published earlier this year shows none of the big four banks could boast more business owner customers who would recommend their services, than would tell their friends to steer clear of their bank.

Bagrie also pointed to the persistently negative sentiment of small business owners on their access to credit.

The small business banking market was also less transparent than the retail banking market, Bagrie said.

Bayly said businesses would have benefitted from the findings of the study.

Big bank net promoter scores amongst business customers.

The study was ordered by Commerce and Consumer Affairs Minister Duncan Webb in June after he concluded there were “indications of possible competition problems” with banking, a sector in which the major banks have recorded a run of record profits.

Webb ordered the market study after mounting cries of protest over high bank profits, including from the founder of 2degrees Tex Edwards, who decried the roughly $2000 profit the banking sector was making on every New Zealander.

Commission chairperson David Small said the market study was the first opportunity in New Zealand’s history to evaluate in-depth whether competition in personal banking benefited consumers over the long term, the commission said.

Small said the commission’s initial review of existing research showed banks were more profitable than in comparable countries over the past decade, “and this raises questions for us”.