National says ‘short, sharp’ inquiry into banking competition needed

National wants a “short, sharp” inquiry into competition in the banking sector instead of an extensive market study from the Commerce Commission.

Nicola Willis, National deputy leader, said an inquiry should be carried out by Parliament’s Finance and Expenditure Select Committee into retail banking regulation and competition.

The announcement comes as pressure mounts for politicians to take action about ever-rising bank profits.

“I have today written to members of the Finance and Expenditure Select Committee asking that we open a short, sharp inquiry into any potential competition issues in New Zealand’s retail banking sector,” Willis said.

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“New Zealanders enduring a prolonged cost of living crisis will have been concerned to hear the Reserve Bank join a chorus of voices casting doubt on the competitiveness of the retail banking market.”

High-profile business leaders Sam Stubbs, founder of Simplicity KiwiSaver, and Tex Edwards, anti-monopolist and founder of 2degrees, have both called for a full market study.

There has also been tentative support for a full market inquiry from the Reserve Bank of New Zealand Te Pūtea Matua. Chief economist Paul Conway said he thought a Commerce Commission market study into the retail banking sector might be warranted.

Commerce and Consumer Affairs Minister Duncan Webb has said no decision has yet been made as to whether the commission would be asked to conduct a banking probe.

But optimism is rising that he will, and Stubbs said: “I’m hearing around Wellington that they are talking terms of reference, not whether we will have one or not.”

Willis said many mortgage-holders were feeling crushed by rapidly rising interest rates, and depositors were getting such a poor deal.

“National believes New Zealand bank customers deserve answers to questions about the adequacy of competition in our retail banking sector, why increases in interest rate rises for deposits have lagged rate rises for lending, and the impact of new regulations imposed by the Government,” she said.

But National was keen to keep the scope of the inquiry limited, and also only hear evidence from a small group of “stakeholders”.

“I propose that the terms of reference for the select committee inquiry should be narrow in scope, and the hearing of evidence should be limited to a narrow group of stakeholders,” she said.

The select committee could then tell the government what steps it should take next, she said.

That could include asking for the Commerce Committee to conduct a full market study similar to the one into the grocery sector, which has led to moves to inject competition into the supermarket sector.

“A formal Commerce Commission market study would take a long time and be extremely resource-intensive, creating a lucrative opportunity for lawyers and consultants, but highly unlikely to give New Zealanders any immediate answers to what are urgent questions,” Willis said.