Banks fail to head off rural banking inquiry

Wednesday, 12 June 2024

Finance Minister Nicola Willis had asked MPs on two select committees to work together to create the terms of reference for a banking inquiry.

Finance Minister Nicola Willis has heeded Federated Farmers’ call for an inquiry into rural banking.

Federated Farmers launched a campaign at the giant Fieldays agricultural fair on Wednesday morning prompted by research it had done revealing an increasing number of farmers were feeling under “undue pressure” from their banks.

Farmers feel the way banks dealt with them had changed in the past five years, and there’s a growing perception banks are reluctant to expand their rural lending, preferring to lend to housebuyers in urban areas.

The farmer lobby group had appeared before Parliament’s primary production select committee late last month calling for an inquiry, and MPs on the committee were frustrated by how little time they had to hear evidence on problems with rural banking.

Now Willis has heeded that call, but while a focus of the inquiry will be on rural banking, she wants it to go wider.

“New Zealanders deserve a banking sector that is as competitive as possible,” Willis said. “Banking services play an important role in our communities and in the economy. Kiwis rely on access to lending when they make big financial decisions like buying their first home or opening a business.

MPs were not impressed by bankers’ assurances over rural lending claims.

“In pursuit of that objective, today I have written to the chairs of the finance and expenditure and primary production committees, requesting a select committee inquiry into banking competition,” she said.

“I have asked that the finance and expenditure committee lead the inquiry, in conjunction with the primary production committee, which will focus on rural banking,” she said.

Banks appeared last week in front of the primary production select committee to tell MPs, some of who were farmers, that they were the “trusted advisers” of farmers, but chairperson Mark Cameron said afterwards that MPs had not been satisfied by the bank lobbyists’ answers.

The inquiry Willis has requested is separate from the Commerce Commission’s market study into retail banking, ordered by the last government.

ACT’s Mark Cameron says MPs of all colours are concerned there may be a ‘real problem’ with rural banking.

That focuses on the state of competition in retail banking, and excluded rural and business banking, much to the annoyance of economist Cameron Bagrie.

The inquiry Willis has called for would be wider than just rural banking, her office confirmed, giving business owners the chance to give evidence.

However, rural banking was front of mind for Willis in calling the inquiry.

“Growing the rural economy is critical to rebuilding New Zealand’s economy and with farmers’ satisfaction with banking services dropping in recent years, it’s critical we better understand the role of bank competition in that sector,” she said.

The primary production select committee would now work with the finance and expenditure committee to jointly develop terms of reference, join meetings to hear submissions relevant to rural banking, and prepare a report on rural banking to feed into the overall inquiry.

“I would expect that the inquiry would, as a matter of course, hear submissions from those banks operating in New Zealand with chairpersons and chief executives being made available for questioning,” Willis said.

The primary production committee is replete with MPs with farming experience.

The Federated Farmers’ campaign for an inquiry was led by farmer Richard McIntyre.

“I have been inundated with phone calls and emails from farmers, and even some former bankers, wanting to tell their stories,” he said.

“And there’s been some pretty harrowing stories.”

The worst of those involved farmers losing farms that their families had owned for generations, he said.