A study into whether Kiwis are getting the best deal from their banks will go ahead, but its findings are more than a year away.
It follows increasing concern about soaring bank profits in New Zealand and calls from across the political spectrum for further investigation.
The four big banks — BNZ, ASB, ANZ and Westpac — declared combined after-tax profits of $6 billion in the last financial year. All are Australian-owned.
The investigation will be carried out by the Commerce Commission and will focus on competition in the banking sector for personal banking services.
Today, Finance Minister Grant Robertson said New Zealanders needed to know they could trust their bank with their finances.
"The cost-of-living is top of mind for many Kiwis and we need to ensure there's a competitive market among banks providing personal loans, mortgages, credit cards and other banking services so that people have confidence they are getting the best deal possible when doing their banking.
"There have been long standing concerns that the market is not working well for New Zealanders. Banks have consistently made high profits over a number of years and their returns have outperformed their peers in other countries."
He said New Zealand's banking sector was dominated by a small number of big players, with four major banks making up about 85% of the mortgage and other lending market, as well as holding 90% of total bank deposits.
Loans by smaller lenders are growing but remain small in comparison, he said.
"There has not been an in-depth look into competition issues in New Zealand's banking for some time, and New Zealand lags other countries such as Australia and the UK into doing a detailed analysis into banking services."
Robertson said the study was "not about bank conduct and culture" and the Financial Markets Authority and Reserve Bank had investigated that issue in 2018, "which has already resulted in a number of measures to protect consumers".
In May this year a Consumer NZ report found nearly 40% of Kiwis didn't trust banks, something attributed to their profit margins while face-to-face contact appeared to reduce.
Bank of New Zealand (BNZ) has posted half-year net profits of $805 million — an increase of 13.5% or $96 million over the previous six months.
ANZ bank — New Zealand's biggest — posted a half-year net profit after tax of $1.1 billion.
Commerce and Consumer Minister Duncan Webb said the market study was the first step in understanding banking competition issues.
The Commerce Commission would focus on "examining barriers to new competitors entering or expanding in the market, the introduction of innovative products and services and consumers' ability to switch between banks", he said.
"As part of the study, the commission will examine banks' profitability and other financial measures to assess competition in the sector.
"The study will be completed by the end of August 2024 and will determine any actions needed to make sure competition is working for bank customers."
A preliminary issues paper was expected in August this year, he said, and he expected it would describe the structure of the industry and provide early indications on the nature of competition.
"It will set a clear signal of direction for the study and may uncover discrete issues which the Government could take steps to resolve, ahead of the final report."
He said the Government was also continuing work on open banking and establishing a consumer data rights regime by releasing a draft bill for consultation this week.
It was aimed at giving consumers control on how their data was used and shared.
"While consumers already share their data, this will allow people to do so in a safe and secure manner between trusted providers.
"This will set rules and regulations for providers to follow in handling and securing consumer data and make the sharing of that data safer, faster and easier."
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