Parliament’s banking inquiry delivers ‘useful but timid’ report

Friday, 22 August 2025

Households and businesses have struggled with high loan rates, and they watched as banks continued to remain high.

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Fourteen months after being tasked with probing bank competition, Parliament’s Finance and Economic Select committee has turned in a report with little new information, proposed tweaks and support for measures already announced.

The inquiry made 19 recommendations across bank capital requirements, barriers to banking, rural and business banking and lending to Māori asset holders, organisations, businesses, and individuals.

Most of the recommendations relate to regulators and government, not the banks themselves. Minister of Finance Nicola Willis welcomed the report.

The committee, which came after an exhaustive Commerce Commission report into bank competition, said it knows the key information won’t be new to the finance sector.

“Our recommendations are also unlikely to be a silver bullet for competition, and it now falls to the various government agencies to determine how to implement and respond to our recommendations,” the report said.

“Many things are already in play,” FEC chair Cameron Brewer said.

The Government has 60 days to respond to the recommendations.

Among the recommendations were opening the door for more competition from overseas banks and fintechs, fees on every day accounts, evaluating the Reserve Bank’s capital requirements and boosting competition via investing more in Kiwibank. The Government has already signalled moves on the latter two.

“I pushed hard for cross-party consensus where it was possible and for 14 out of the 19 recommendations that has been achieved. Where it hasn’t, differing views have been made clear,” Brewer said.

“Political consensus on most recommendations is important because it will help keep the pressure on the regulators and banking sector, as will our insistence for six-monthly updates on progress.”

There were further recommendations around transparency for climate disclosure and rural lending, as well as some recommendations around changing rules to improve banking for Maori individuals and organisations.

Kent Duston of the Banking Reform Coalition called the report’s recommendations, “useful but timid”.

“Even if all the committee’s recommendations are actioned by the government, it’s not going to move the dial,” he said.

“We need large-scale systemic reform of the banking sector, including the break-up of the Australian-owned banks, and this report doesn’t deliver that. It’s time for the minister of finance to walk the talk, and take action – yet another report isn’t going to cut it.”

The banking sector welcomed the inquiry.

“The committee has carried out a thorough investigation of consumer and rural banking in New Zealand today. The focus on regulatory barriers to increased competition, and what regulators can do to improve that, is especially good to see,” New Zealand Banking Association chief executive Roger Beaumont.

“We will discuss the recommendations with our members and will work constructively with the government in its response to the inquiry,” he said

Parliament’s banking inquiry began life last year as a probe into farmer discontent with banks by the Primary Production Select Committee which is made up of MPs with rural constituencies and backgrounds.

Farmers felt banks were charging them too much for loans, compared with the price of home loans for city households, and that banks were quietly withdrawing lending from the agricultural sector.

Kent Duston from the Banking Reform Coalition ripped in the big four banks’ excess profits at the Finance and Expenditure select committee on Wednesday.

But egged on by the powerful farming lobby group Federated Farmers, the Government decided to expand it into a full-blown inquiry by the higher-profile Finance and Expenditure Select Committee.

In the first round of hearings at the Primary Production Select Committee last year, banks sent in-house lobbyists to speak, and failed to impress MPs, with ACT MP Mark Cameron calling out the banks’ “hubris” over bland statements of their support for farmers, when Cameron was hearing the opposite from friends and neighbours, and Federated Farmers.

The banks didn’t make that mistake twice, and in the second round of hearings in front of the Finance and Expenditure Select Committee all sent their chief executives and chairpersons of the board.

In March, ASB chief executie Vittoria Shortt told MPs that it was time to ensure the Reserve Bank capital requirements for banks were not creatign barriers that 'hold us back'.

That worked, and succeeded in turning MPs’ eyes onto deregulation of the banking sector, and putting pressure on the Reserve Bank Te Pūtea Matua, which it accused of being too risk-averse in requiring them to hold more capital than they, or their shareholders wanted to hold.

That, MPs were told, meant loans were more costly then they needed to be.

But they also faced more vociferous criticism from anti-monopolists who wanted tough action.

Duston called the big four Australian-owned banks (ANZ, ASB, Westpac and BNZ) “fat, dumb and lazy”.

Kent Duston from the Banking Reform Coalition tears into high bank profits at the Finance and Expenditure select committee banking inquiry in February.

He accused them the big Australian-owned banks of taking double the profits their shareholders would be willing to accept.

Duston said a fair risk-return on shareholders’ capital invested in ANZ, Westpac, ASB and BNZ would be 5.5%.

“They are typically making between 11% and 12%, so they are twice as profitable as they should be,” he said.

Some saw the banking inquiry not as shining a spotlight on excess profits, but a weak torch, doubting that it would result in any real change.

When the Government decided in November last year to hand the banking inquiry to the Finance and Expenditure Select Committee, Sam Stubbs, managing director of KiwiSaver provider Simplicity, said three years before, the idea of Parliament holding an inquiry into banking had been “unthinkable”.

But he did not hold out high hopes for change, saying: “While the Parliamentary inquiry into banking should be applauded for putting the spotlight on egregious banking practices and profits, I just wish it had more than a 25 watt bulb.”

There had been a growing drum-beat of dissatisfaction with banks. In August 2024, the Commerce Commission published its report into competition in household banking services, which paved the way for the Government to give Kiwibank permission to raise up to $500 million to expand to bring more competition to its larger Australian rivals.

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