ANZ, BNZ and ASB CEOs claim loans would be cheaper if Reserve Bank rules loosened

Monday, 10 March 2025

ANZ chief executive Antonia Watson told MPs at her call-back to Parliament’s banking inquiry that customers should “absolutely” be beneficiaries, if - as they would like it - banks were able to hold less capital.

Watson gave an assured performance at her second appearance at the inquiry, which has increasingly focused on whether Reserve Bank Te Pūtea Matua’s capital requirements for banks should be weakened to make it less costly for banks to lend to businesses and farmers.

Calls for lower capital requirements have an extra piquancy this week, just days after Reserve Bank Governor Adrian Orr unexpectedly resigned half way through his five year term. An official reason has not been given, but it is known Finance Minister Nicola Willis is looking at different ways that she can compel the Reserve Bank to change certain things including its current capital requirements settings.

MPs have expressed concern that the Reserve Bank has set an excessively low tolerance for financial risk compared with other countries, and that has added cost to lending, especially to farmers and businesses.

If capital requirements were eased, Watson said: “We would see downward pricing pressure on consumer and business customers.”

A similar message came through from the chairs and chief executives of BNZ and ASB who appeared before the hearing after Watson.

The Reserve Bank set its bank capital requirements to reflect New Zealand’s higher risk of economic disruption as a result of its small, agriculture-focused economy and its higher risk of natural disasters. However, Watson said if she had a magic wand, she would have the Government look at whether the Reserve Bank’s settings were too conservative.

BNZ chair Warwick Hunt, appearing after Watson, called the Reserve Bank’s risk settings as “extremely conservative”.

But the Reserve Bank capital settings could not be thought of in isolation as banks faced other regulations, including environmental and conduct regulation, he said.

Dan Huggins, BNZ chief executive, was asked if banks would pass through reduced costs through reduced capital requirements to their borrowers.

“All things being equal you would expect that to be passed on to customers,” he said, though he also told the MPs that BNZ’s return on equity had fallen, and needed to rise.

ASB chief executive Vittoria Shortt said: “We need economic growth. We are almost coming through a challenging period. Now is the time to pose these questions.”

She said when the Reserve Bank proposed its new capital requirements in 2019, ASB’s calls for a cost-benefit analysis of them to be undertaken was not heeded.

It was clear capital requirements had needed to rise, but ASB felt the increases due to be fully in place by 2028, pushing up loan rates, would go too far.

Watson pushed back on MPs’ concerns that the bank was too big, too profitable, and too unwilling to lend to farmers and businesses compared to its willingness to make urban home loans.

National MP Dan Bidois quizzed Watson over the fact that in 2000, half of ANZ’s loans were to businesses, but that had now fallen to 26% as the bank poured more money into urban housing loans.

Bidois wanted to know whether that was a result of ANZ favouring more profitable home loans over business lending.

“I can understand why you might think that,” Watson said.

But Watson said the shift over the last two and a half decades was demand-led.

“We are not increasing our stock of farms, so to speak, but we are rapidly increasing our housing supply,” she said.

“There’s no favouring of home lending per se,” she said.

Despite lending relatively little to farmers and businesses, Watson told MPs that the Reserve Bank’s capital requirements resulted in a higher proportion of the bank’s capital being allocated to back business lending.

“Over half our capital is devoted to business and capital lending,” she said.

“We are really willing to lend to businesses,” she said.

Green co-leader Chlöe Swarbrick pressed Watson on her appearing to speak in support of the introduction of a capital gains tax in New Zealand.

Watson denied she had advocated for a capital gains tax. She had been calling for a review of the tax system.

There have been calls for ANZ and ASB to be split to increase competition.

Labour’s Arena Williams asked Watson: “Is ANZ too big?”

“I think having large banks in the economy is important,” Watson replied.

Big banks brought financial stability, and enabled them to deal with regulations imposed on the sector, she said.

ACT’s Mark Cameron wanted to know whether ANZ would pull out of the United Nation’s Net-Zero Banking Alliance like some US and Canadian banks have done.

Watson said ANZ New Zealand was not a member of the alliance, which required banks to take action to get to net-zero financed emissions by 2050.

ANZ, the Australian owner of ANZ in New Zealand, was a member.

Watson noted however, that New Zealand’s government position was that the country aimed to be net zero on carbon emissions by 2050.

“We see our role as financing the transition,” Watson said.

Referencing some banks’ reluctance to lend to some businesses, Watson said ANZ continued to bank and lend to petrol retailers, and would lend to other legal businesses, including those in the sex industry.

So angered was New Zealand First’s Shane Jones by banks’ unwillingness to lend to petrol retailers, that the party developed a woke banking bill designed to prevent banks from debanking the likes of petrol stations, coal miners and farmers for environmental or social reasons.