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New Zealand’s government announced an inquiry into its banking sector amid concerns that lenders are making excessive profits.
Cabinet has agreed to a market study into competition in the sector for personal banking services to ensure the market is working well for New Zealanders, Finance Minister Grant Robertson said in Wellington. It will be conducted by the antitrust watchdog Commerce Commission and be completed by August 2024.
The government has voiced concerns about bank profits for several months, particularly when lenders reported earnings increases at a time when the nation was facing a surging cost of living.
“There have been long standing concerns that the market is not working well for New Zealanders,†Robertson told reporters. “If you’re a person struggling with the increase in the cost of living, struggling with the costs of food, and you turn around and see the profits that banks are making, you have legitimate questions. That’s what this study is designed to answer.â€
New Zealand’s four biggest banks are all units of Australia’s major lenders, which together hold about 90% of deposits. Australia & New Zealand Banking Group Ltd and Westpac Banking Corp operate under their own brands, while Commonwealth Bank of Australia owns ASB Bank and National Australia Bank Ltd controls Bank of New Zealand.
Robertson said banks have consistently made high profits over a number of years and their returns are larger than in other countries.
Across the industry bank earnings rose 17% to NZ$7.2 billion ($4.4 billion) in 2022 for a return on equity of 13.4%, according to KPMG analysis. The four biggest lenders generated profits exceeding NZ$6.4 billion.
Former Prime Minister Jacinda Ardern first flagged government concerns about bank profits and fees in November.